BeWater Research | What did BTCFi ecosystem do right behind the rise of "生息"?

Author: Maia, BeWater Venture Studio

TL; DR

• In terms of the issuance and application of BTC-anchored assets, currently, centralized encapsulation of BTC still accounts for more than 75% of the dominant position. However, at the same time, BTC LST represented by LBTC and SolvBTC.BBN has rapidly risen in the BTC-anchored asset market in recent months with the launch of Babylon, becoming another emerging force. The current market size of BTC LST has reached 25.6 K BTC. Driven by the demand for interest-bearing underlying assets, the BTC liquidity stake and point derivative markets are gradually becoming new growth points in the BTCFi field.
• @Coredao_Org is a BTC-driven L1 network, providing users with robust returns through non-custodial stake solutions and a dual-stake mechanism. Its TVL has risen by 4757.9% in half a year, reaching $591.5 M. Core's growth strategy includes: (1) Focusing on the incremental market of BTC-anchored assets to increase ecosystem Liquidity, rapidly absorbing rising BTC LST assets (2) Building supporting native protocols and rapidly integrating with the BTCFi project to establish a complete ecosystem application (3) Utilizing the Airdrop and market performance of the native Token $CORE to support incentive structures, further promoting participation and asset retention.
• @use_corn is an emerging ETH L2 network, with a current total value locked (TVL) of $425.9 M in Corn Kernels, laying the foundation for the Mainnet launch. Corn's rapid rise is attributed to its effective capital accumulation in the incremental market of BTC LST. By focusing on the interest-bearing properties of liquidity staked tokens and the derivative gameplay of points, Corn and Pendle have jointly launched five pools that have attracted a total TVL of $290.3 M, accounting for 11.4% of the total BTC LST market.
• @build_on_bob is a hybrid L2 network combining BTC and ETH, attracting a large amount of assets through extensive integration of BTCFi projects and one-click liquidity stake services. Currently, BOB TVL has reached $65.7 M, with the majority of assets coming from the stock portion of BTC-anchor assets $WBTC. BOB's performance is mainly due to: (1) the trust-minimized bridge architecture that connects assets from most networks, solving the Liquidity fragmentation problem (2) one-click liquidity stake entry and a strong ecosystem, establishing a convenient stake entry and complete application scenarios

This year, as the BTCFi narrative evolves, the on-chain liquidity of BTC assets has gradually become the focus of major ecosystems and protocols. With the introduction of BTC expansion solutions and the rise of BTC LST, BTC is transitioning from a static store of value to an asset that can participate in more on-chain revenue scenarios, enhancing its application potential in the entire Decentralized Finance ecosystem.

@Coredao_Org, @build_on_bob and @use_corn are representative rise cases in the BTCFi field in the second half of the year: Core focuses on leveraging the large volume of BTC LST assets during the rise period; Corn collaborates with Pendle to quickly capture the incremental market by introducing point derivatives gameplay; BOB attracts Liquidity through enriching the ecosystem and providing flow stake services; the series of actions around 'Liquidity' by various ecosystems greatly activates the Liquidity of BTC assets. In the future, as BTC Liquidity is gradually released, there is still great rise potential for the on-chain accumulation scale of assets in the BTCFi ecosystem.

1 Background

1.1 BTC asset on-chain flow path

BTC and its anchored assets can be divided into the following three layers in terms of on-chain flow direction:

• Layer 1: Native BTC
• Layer 2: (1) Wrapped BTC based on centralized custodial issuance (2) Mapped assets running on BTC L2 and SideChain (3) liquid staking BTC
• Layer Three: Various BTC derivative assets in various downstream Decentralized Finance scenarios

1.2 BTC Asset Market Status

• BTC Anchored Asset issuance and application overview

From the issuance of BTC-backed assets on the Ethereum, Arbitrum, and BNB networks, it can be seen that centralized custody still dominates the market, with WBTC (156.1 K supply) and BTCB (65.3 K supply) accounting for over 75% of the total circulation of BTC-backed assets. In addition, LBTC (10.5 K supply) and SolvBTC.BBN (8 K supply) have also risen rapidly in the BTC (re)staking narrative in recent months, becoming another emerging force in the BTC-backed asset market.

As the anchored token with the highest Consensus and largest market capitalization, the main application scenarios of BTC anchored assets are concentrated in lending protocols. For the largest scale WBTC and BTCB, their largest downstream applications are in Aave v3 and Venus protocol respectively, with TVL accounting for more than 20% of their total supply, reflecting the demand of large funds for relatively stable returns in the BTCFi field.

*

• BTC LST issuance和应用概况

Currently, the total market cap of BTC LST is about 25.1K BTC, with Lombard and Solv Protocol accounting for over 70% of the market share. The absorption and issuance of BTC LST directly affect the flow and precipitation of BTC assets on various chains. Among them, Solv has a particularly significant impact on the TVL of various chains, bringing net inflows of $309.7M and $177.8M to Core and Scroll respectively, significantly increasing the asset size of these two chains.

Compared to the centralized custodial mode of issuance, BTC and LST as interest-bearing assets have expanded their application scenarios. In addition to the lending protocol, the points trading market has become another important downstream application for BTC and LST. Avalon and Pendle are the protocols with the most accumulated funds in the lending and points derivative market zones respectively, achieving a win-win situation with the development of the BTCFi and BTC staking narratives.

*

2 BTCFi The asset precipitation strategy of the ecosystem

2.1 Core: Focusing on Incremental Assets and Token Incentives to Drive the Ecology on Both Wheels

• Basic Information

Core is an L1 scaling solution driven by BTC, which allows users to passively earn income through non-custodial BTC stake without the need to transfer or wrap BTC. Since its launch in April 2024, over 7,500 BTC has been staked on Core, benefiting from the security protection of BTC and ensuring the network security of Core. In July 2024, Core introduced a dual stake mechanism for BTC and CORE. Users can stake BTC to earn risk-free basic income and also stake the native token CORE to receive additional rewards, which will be tied to the amount and duration of CORE stake. The dual stake mechanism has further boosted the TVL rise of Core.

Today, Core's TVL has reached $591.5 M, rising 4757.9% half-year, making it the 16th largest blockchain in TVL. Core TVL's rise presents several key nodes: In June, the launch of native lending protocol @colend_xyz and integration with @SolvProtocol derivatives drove a TVL rise of $51.1 M that month, an increase of 202.2%. In July, the introduction of the dual stake mechanism drove new inflows, driving the TVL rise of $92.6 M for the month, an increase of 121.3%. In August, the integration of BTC Restaking leadingprotocol @Pell_Network in Core further triggered a larger-scale fund precipitation.

*

• rise strategy

The rise of Core TVL is mainly driven by the following factors: (1) focusing on the incremental market of BTC-anchored assets to improve ecosystem Liquidity and quickly absorb Solv derivatives assets of rise; (2) building native protocols such as Colend and integrating them quickly with projects like Pell Network to establish a complete ecosystem application; (3) using Airdrop and market performance of the native token $CORE to support the incentive structure, forming a multidimensional ecological synergy.

• Integrated and cooperative with the Depth of Solv derivative assets

SolvBTC.BBN and SolvBTC are currently the fifth and sixth largest BTC derivatives in the market, with a total circulation of 15.6K BTC, and they are still in a stable rising phase. Since June, SolvBTC has expanded to the Core ecosystem and integrated with two major protocols, Colend and Pell Network, driving a total value locked (TVL) rise of $51.1M in that month. Currently, Solv derivatives account for 65% of Core's TVL, which is not only due to the stable income provided by the Decentralized Finance module in the Core ecosystem for underlying assets, but also includes the high leverage incentives provided by Core for SolvBTC applications and the expected Airdrop supported by $CORE Token. This indicates that the ecosystem development of Core is not limited to its native BTC staking mechanism, but also focuses on introducing and incentivizing high-quality and large-scale BTC assets to enhance the activity and lock-up volume of the entire network. Through integration and cooperation with Solv Protocol's Depth, Core not only increases TVL but also provides diversified liquidity asset support for on-chain Decentralized Finance scenarios.

• BTCFi ecosystem construction led by Colend and Pell Network

Colend is the native lending protocol on CORE, which undertakes the majority of asset deposition in the ecosystem. Since the introduction of SolvBTC in June and providing maximum incentives, its TVL has risen significantly. Currently, 85% of the TVL in the Colend protocol comes from the inflow of assets derived from the Solv Protocol, demonstrating its strong synergistic effect with Solv. In addition, Colend is also a core application scenario for derived assets of the CORE Token, absorbing $17.4 million of wCORE and $5.2 million of stCORE. The interest-bearing scenario provided by Colend for CORE LST has played a boosting role in enhancing users' willingness to stake CORE, while also providing support to maintain its value.

• In addition, BTC Restaking has become a stable stake income scene for BTC derivative assets. In August, the leading project Pell Network of BTC Restaking quickly drove the ecosystem TVL rise after its launch on Core, with the majority of inflows still coming from Solv Protocol, locking in $108.3 million worth of Solv derivative assets. In terms of project incentives, Pell Network provides the highest multiple points rewards for SolvBTC on Core, while Core also offers a 5X Ignition Drop reward for Pell Network, further enhancing the participation and application of BTC LST in Pell Network protocol within the Core ecosystem. As of now, Pell Network has accumulated a TVL of $271.7 million, with close to half of the contribution coming from the Core ecosystem.

*

• Incentive structure driven by Airdrop and market performance support of the native Token $CORE

In May 2024, Core launched the Sparks incentive program with the goal of accelerating the adoption and expansion of the ecosystem by rewarding on-chain contributors. The program is currently in its second quarter. Unlike projects that rely on point incentives or have unclear expectations for coin launches, Core launched its native token $CORE as early as 2023 and successfully completed its initial Airdrop, establishing a large community base. $CORE, as the native token of the ecosystem, is primarily used for paying transaction fees, staking on the network, earning rewards, and participating in on-chain governance. According to the Tokenomics design, user rewards account for 25.029% of the total supply of $CORE, totaling 525.6 million tokens. Previously, Core distributed a large number of tokens to ecosystem participants through the Airdrop campaign conducted via the Satoshi App, increasing user long-term follow and continuous contributions to the ecosystem. The second quarter Airdrop plan will unlock 24.7 million $CORE, of which 17 million will be used to reward participants and further drive user participation in the Core ecosystem.

• utm_source=iterable&utm_medium=email&utm_campaign=q2_quarterly&utm_content=state_of_core_q2_2024&destination=protocol_services_research&utm_source=Iterable&utm_medium=email&utm_campaign=campaign_UO - Wednesday 9/18&utm_source=iterable&utm_medium=email

2.2 Corn: Efficiently attracting BTC LST market Liquidity with point derivative gameplay

• Basic Information

Corn is an ETH L2 network launched recently, using hybrid tokenized BTC (BTCN) as gas fees and economic incentives, aiming to unify the interests of users, developers, and Liquidity Providers. The core of Corn's incentive mechanism lies in the veCHAIN model, and the stakers of CORN Tokens will determine the allocation of network rewards.

Currently, CORN has not yet launched its Mainnet, but has effectively attracted $425.8 million in funds through a deposit event jointly launched by multiple parties, significantly exceeding the BTC scaling layers such as Merlin and BSquared that have already gone live. These deposits are mainly concentrated in pools launched by Pendle in collaboration with several BTC LST projects such as LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, accounting for 85% of the current total TVL.

• rise strategy
• Collaborate with Pendle to lead the BTC LST token derivative gameplay

The points derivatives market is one of the key strategic scenarios for BTC LST as a yield-generating asset. As the leader in this zone, Pendle was the first to start integrating various BTC LSTs in early September. Currently, the collaboration between Corn, Pendle, and BTC LST supports five major BTC LST assets: LBTC ($41.5 M TVL, $1.1 M 24h Volume), SolvBTC.BBN ($97.5 M TVL, $300 K 24h Volume), eBTC ($20.2 M TVL, $658.4 K 24h Volume), PumpBTC ($60.5 M TVL, $437 K 24h Volume), uniBTC ($70.6 M TVL, $20.8 K 24h Volume), absorbing 11.4% of the total BTC LST market volume. The collaboration with longer has generated good synergies:

For BTC LST holders, the points leverage market provides a diversified strategy gameplay, and Pendle has become a major application scenario, accounting for 10%-30% of the total supply of BTC LST. In addition, Corn provides the highest multiplier points incentives for these pools, further attracting more holders to participate. For Corn, BTC LST is a core contributing factor in driving TVL rise in its early stages. Currently, these pools are the only applications in Corn's points mining activity that generate external benefits, laying the foundation for its future Mainnet launch.

*

• TVL BootStrap Campaign

In the existing point Mining design of Corn, users can earn 1 Kernel point every 210 minutes for each $1 worth of assets deposited. These deposits can be withdrawn at any time without any penalty or fee, providing great flexibility. The goal of this activity is to attract initial Liquidity through Kernel points incentives. However, at present, apart from the BTC LST pool in cooperation with Pendle, other deposits have not brought additional value to the network. The flexibility of instant withdrawal of deposits also brings short-term Mining risks, which may lead to the inflation of Corn points, thereby diluting the expected value allocated to individuals.

2.3 BOB: Secure bridge and strong ecosystem help gather assets

• Basic Information

BOB is an innovative hybrid Layer 2 network that combines the advantages of BTC and Ethereum. It leverages the features of Ethereum Smart Contracts and EVM, and adopts rollup technology to improve transaction processing capacity and scalability. At the same time, the final transaction confirmation of BOB is completed on the BTC blockchain, enjoying the high security guarantee provided by BTC PoW Consensus Mechanism. Currently, BOB's total TVL has reached $65.7 million, with the majority of assets coming from $WBTC.

*

• rise strategy

Building on the bridge architecture that solves the trust and Liquidity fragmentation issues, BOB's performance in the past six months has also benefited from the momentum of launching one-click liquidity stake service under the narrative of BTC (re)staking, as well as strong market force and ecological cooperation, which has collectively driven the rise of the ecosystem.

• Flowing stake service and ecological integration

BOB Stake integrates multiple fluid stake service providers and Decentralized Finance platforms, utilizing the BOB gateway to achieve the functionality of multiple protocol stake with a single BTC transaction. Through BOB Stake, users can easily stake BTC to multiple LST protocols, reducing time and costs. Additionally, BOB Stake also integrates the LST staked by users with the Depth of Decentralized Finance protocols, making BOB a convenient gateway for fluid stake of BTC and Decentralized Finance applications.

In ecosystem construction, BOB Stake integrates a variety of stake protocols with Babylon stake as the core, and supports the liquid staking token LST, including SolvBTC.BBN, uniBTC, and PumpBTC. BOB has also become the preferred BTC staking platform for multiple aggregators and Wallets, attracting over 3 million users on the Staking Rewards platform. In addition, BOB has integrated with dozens of Decentralized Finance protocols such as Avalon, Layerbank, and Segment, providing diverse interest-bearing applications for BTC LST and continuously enhancing market influence. Currently, Avalon, as the main lending protocol within the BOB ecosystem, has attracted on-chain 35.6% of asset deposits, almost entirely composed of the supply of SolvBTC.BBN. However, the utilization rate is only 8.9%, indicating a relatively low actual borrowing demand within the BOB ecosystem, and the need to strengthen liquidity aggregation and ecosystem protocols.

*

• Incentive Plan BOB Fusion

BOB Fusion is the core incentive program in the BOB ecosystem, designed to incentivize users to earn points through Cross-Chain Interaction assets, participation in Lock-up Positions, ecological project interactions, and referral mechanisms. Supported deposit assets include BTC anchor assets, stablecoins, and ETH LST, etc. In the current BOB Fusion third season plan, holding, borrowing, and trading SolvBTC.BBN and other interest-bearing assets receive the highest multiple incentives compared to other assets. This incentive program has significantly promoted the development of the BOB ecosystem, attracting over 147,000 users, over 100 partners, and 60 ecological projects online.

3 Summary

By observing the three emerging forces in the BTC ecosystem, Core, BOB, and Corn, we can see the differentiated asset precipitation strategies of different networks. Core has attracted a large amount of assets by integrating with the growth period Solv Protocol's Depth-derived assets and innovatively introducing a dual stake mechanism to provide stable income. Corn has successfully absorbed a large amount of BTC LST funds through the joint launch of point derivative gameplay with Pendle, laying the foundation for its future Mainnet launch. BOB has attracted a large amount of assets through extensive integration of BTCFi projects and one-click liquidity stake services.

From the perspective of the on-chain flow of BTC-anchored assets, the key to effectively realizing the ecological capital precipitation lies in connecting and incentivizing a large volume of incremental anchored assets, forming composable interest-bearing strategies through diversified Decentralized Finance applications, and providing longer-term incentive expectations. The synergistic effect will drive the activity and Liquidity of BTC-anchored assets on various on-chain networks. Currently, the TVL of BTC-anchored assets on L2 and Sidechain expansion networks is about 1.6 billion USD, accounting for only 0.14% of the total Market Cap of BTC. With the gradual release of future BTC Liquidity, there is still significant potential for the scale of BTC asset precipitation on various on-chain networks and the application scenarios of the BTCFi ecosystem.