Bitcoin’s Next Chapter: From Store of Value to Pristine Collateral

Bitcoin has been live for over fifteen years, and despite the countless new chains and dApps that have emerged since, it remains the most recognised, trusted, and widely held crypto asset in the world.

Over time, its fixed supply and unique properties have earned it the title of a Store of Value, often referred to as digital gold. These characteristics are why it continues to be regarded as the undisputed king of the crypto world.

Early Attempts at Productive Bitcoin

Yet, while other digital assets can be put to work through staking or DeFi, Bitcoin has long been difficult to make productive, not for lack of interest, but because of the technical constraints surrounding its use.

As the demand for Bitcoin yield had always existed, the first serious attempt to make Bitcoin productive began with the launch of WBTC in 2019.

This innovation made it possible to use BTC on Ethereum in the form of a wrapped token, unlocking access to Ethereum’s DeFi ecosystem and paving the way for the first Bitcoin-backed borrowing use cases.

This marked the moment when the industry truly recognised the potential of Bitcoin lending and borrowing. Platforms like BlockFi and Celsius soon emerged as CeFi leaders, offering yield on Bitcoin deposits by lending customer funds to institutions to generate returns.

Unfortunately, the crypto world learned the hard way how relying on centralised platforms and solutions can end badly. The absence of transparency around how these firms managed customer funds ultimately drove both BlockFi and Celsius into bankruptcy, erasing much of their clients’ savings.

Likewise, the recent custodial shift of WBTC, now involving a partnership with Justin Sun, has renewed concerns about centralisation and the reliability of custodial solutions in DeFi.

Bitcoin’s Institutional and DeFi Integration

The failures of early attempts to make Bitcoin productive did not bring innovation to a halt. While development in this vertical slowed during the 2022 bear market, it has accelerated rapidly over the past year and a half.

From an institutional perspective, the landscape has shifted considerably since the launch of Bitcoin ETFs. Some institutions now accept BTC ETF shares as collateral; Cantor Fitzgerald is launching a $2 billion Bitcoin lending programme in partnership with Tether; and more recently, J.P. Morgan announced plans to accept actual Bitcoin as loan collateral.

Meanwhile, DeFi has been working to succeed where CeFi failed. Leading protocols such as Aave and Morpho have made attracting Bitcoin a core priority, while new teams are building directly on Bitcoin to create more Bitcoin-aligned capital markets.

In short, there has never been more experimentation aimed at unlocking Bitcoin lending and borrowing at scale.

The Rise of BTCFi

Both traditional finance and crypto markets are realising that Bitcoin-backed loans represent a trillion-dollar opportunity, with DeFi set to play a central role in unlocking it.

That’s why Coinbase partnered with Morpho to offer BTC-backed loans, issuing over $300 million in just six months since launch. The company also introduced cbBTC, a wrapped Bitcoin token designed for use across Base and other chains to accelerate on-chain Bitcoin adoption.

But Coinbase is far from alone in this. Leading ecosystems are racing to attract as much BTC as possible and activate Bitcoin-backed lending as a way to deepen liquidity.

Even traditional institutions like BlackRock are now building on-chain, recognising that integrating DeFi products can make them more efficient and significantly reduce operational costs, which would tie into improving their offering around BTC products.

But the winners will be those who recognised this opportunity early and spent years building a robust BTCFi ecosystem capable of drawing Bitcoin capital on-chain.

This is the reason Stacks ecosystem is the leading Bitcoin L2 in terms of BTC supply and introduced a new compelling design to organically attract Bitcoin capital.

With Dual Stacking launched, those that bring BTC (in the form of sBTC) on Stacks earn around 0.5% apy BTC yield for simply holding and get up to 10x boost on the rewards for using sBTC in DeFi.

Solutions like Stacks are pushing the Bitcoin economy forward by building the essential primitives that make Bitcoin finance accessible to everyone (e.g Bitcoin lending and borrowing with Zest).

Scaling BTC-Backed Lending Requires More Bitcoin and DeFi Experts

While Bitcoin adoption as collateral is growing and will keep rising from here, scaling Bitcoin backed loans will require deep expertise in DeFi but of Bitcoin too.

This is why Zest Protocol is poised to be a leading player in this vertical:

- Backed by the most respected investors and Bitcoiners, including Tim Draper, Muneeb, YZi Labs (formerly Binance Labs), and Flow Traders.

- The team consists of OG Stacks builders and Bitcoiners who deeply understand building on Bitcoin, making it the most knowledgeable team on Bitcoin in the space.

- Zest Protocol has proven to be battle tested with more than 1,500 liquidations processed with zero bad debt

With this background, Zest Protocol is ready to keep innovating and make Bitcoin lending and borrowing easily accessible to everyone.

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