Development and Application of BTC-anchored Assets in the Blockchain Ecosystem

Recently, with the deepening of the BTCFi concept, the on-chain liquidity of BTC assets has gradually become the focus of attention for major ecosystems and protocols. BTC is transforming from a static store of value into an asset that can participate in more on-chain yield scenarios, enhancing its application potential in the entire DeFi ecosystem.

Currently, centralized wrapped BTC still dominates, but the market for BTC liquid staking tokens (LST) is growing rapidly, reaching a scale of 25.6K BTC. Driven by the demand for yield from underlying assets, BTC liquid staking and points derivatives markets are becoming new growth points in the BTCFi sector.

Core, BOB, and Corn are representative cases in the BTCFi field for the second half of the year:

Core is a BTC-driven L1 network that offers robust yields through non-custodial staking and dual staking mechanisms. Its TVL has grown by 4757.9% in six months to $591.5M. Core focuses on the BTC LST incremental market, building native protocols and rapidly integrating BTCFi projects, using the $CORE token to incentivize participation.

Corn is an emerging ETH L2 network, currently boasting a cumulative TVL of $425.9M. Corn focuses on the yield attributes of BTC LST and derivative gameplay, with five pools launched in collaboration with Pendle attracting $290.3M in TVL, accounting for 11.4% of the BTC LST market.

BOB is a hybrid L2 network that combines BTC and ETH, attracting assets through extensive BTCFi project integrations and one-click liquidity staking services. The current TVL reaches $65.7M, primarily from $WBTC. BOB's bridging architecture and convenient staking entry points are its advantages.

The series of actions around "earning" by various ecosystems has greatly activated the liquidity of BTC assets. In the future, as BTC liquidity is gradually released, the on-chain accumulation scale of assets in the BTCFi ecosystem still has huge growth potential.

Flow Path of BTC Assets on the Blockchain

The flow direction of BTC and its pegged assets on the chain can be divided into three layers:

1. First Layer: Native BTC
2. Layer Two:
   • Wrapped BTC issued based on centralized custody
   • Mapped assets running on BTC L2 and SideChain
   • Liquid Staking BTC
3. Layer 3: Various BTC derivative assets in downstream DeFi scenarios

Current Status of BTC Asset Market

Overview of BTC Pegged Asset Issuance and Applications

From the issuance situation of the three major networks Ethereum, Arbitrum, and BNB, centralized custody issued wrapped BTC still occupies the vast majority of market share, with $WBTC(156.1K supply) and $BTCB(65.3K supply) accounting for more than 75% of the total circulation of BTC-backed assets.

$LBTC(10.5K supply) and $SolvBTC.BBN(8K supply) have recently seen rapid growth in the BTC LST market, becoming an emerging force in the BTC pegged asset market.

BTC-backed assets are primarily used in lending protocols. The largest downstream applications of $WBTC and $BTCB are in Aave v3 and Venus protocol respectively, with TVL accounting for over 20% of their total supply, reflecting the demand for stable returns in the BTCFi sector from large funds.

BTC LST Issuance and Application Overview

Currently, the total amount of BTC LST in the market 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 liquidity and accumulation of BTC assets across chains, with Solv having a significant impact on the TVL of Core and Scroll.

Compared to wrapped BTC, BTC LST expands richer application scenarios as an interest-bearing asset. In addition to lending, the points trading market has become an important downstream application. Avalon and Pendle are the protocols with the most BTC LST funds in the lending and points derivatives markets, achieving win-win growth with the development of BTCFi and BTC staking narratives.

BTCFi Ecosystem Asset Accumulation Strategy

Core: Focus on dual-driven ecological growth of incremental assets and token incentives

Core is an L1 scaling solution driven by BTC that allows users to earn passive income through non-custodial Bitcoin staking. Currently, over 7,500 BTC are staked in Core. In July 2024, a dual staking mechanism for BTC and CORE will be launched, allowing users to stake CORE for additional rewards.

The core TVL has reached $591.5M, growing by 4757.9% over six months. Key growth milestones include: the launch of the native lending protocol Colend and integration with Solv Protocol's derivative assets in June; the introduction of dual staking mechanisms in July; and integration with Pell Network in August.

Core TVL growth is primarily driven by the following factors:

1. Focus on the BTC anchored asset incremental market, absorbing the rapidly growing Solv derivative assets.
2. Build native protocols and quickly integrate with the BTCFi project to establish a complete ecosystem application.
3. Utilize the $CORE token airdrop and market performance to support the incentive structure

Deep integration and cooperation with Solv derivative assets

SolvBTC.BBN and SolvBTC are the fifth and sixth largest BTC derivative assets in the market, with a total issuance of 15.6K BTC. Starting from June, SolvBTC expanded into the Core ecosystem, deeply integrating with Colend and Pell Network, driving a $51.1M TVL growth in that month.

Currently, Solv's derivative assets account for 65% of Core TVL, thanks to the Core ecosystem's DeFi module providing stable earning scenarios for underlying assets, as well as high incentives for the SolvBTC application and expectations for $CORE token airdrops.

Core focuses on introducing and incentivizing high-quality large-scale BTC assets to enhance network activity and locked positions. The deep integration with Solv Protocol not only increases TVL but also provides diversified liquid asset support for on-chain DeFi scenarios.

The BTCFi ecosystem construction led by Colend and Pell Network

Colend is the Core native lending protocol that holds a significant portion of the ecosystem's asset deposits. After introducing SolvBTC in June and providing maximum incentives, the TVL has grown significantly, with 85% coming from Solv Protocol derivative assets.

Colend is also a core application scenario of the CORE token derivative asset, attracting $17.4M wCORE and $5.2M stCORE. It provides a yield-generating scenario for CORE LST to boost users' willingness to stake CORE, supporting its value.

In August, BTC Restaking leader Pell Network rapidly drove TVL growth after launching on Core, mainly from Solv Protocol, accumulating $108.3M in Solv derivative assets. Pell Network offers the highest multiplier point rewards for SolvBTC on Core, and Core also provides a 5X Ignition Drop reward for Pell Network.

Currently, Pell Network's cumulative TVL has reached $271.7M, with nearly half of the contribution coming from the Core ecosystem.

The incentive structure supported by the $CORE token airdrop and market performance.

In May 2024, Core launched the Sparks incentive program, aimed at accelerating ecosystem adoption and expansion by rewarding on-chain contributors, currently in its second quarter. Core had earlier launched its native token $CORE in 2023 and completed its initial airdrop, laying the foundation for a large community.

$CORE is primarily used for paying transaction fees, network staking, obtaining rewards, and participating in on-chain governance. User rewards account for 25.029% of the total supply of $CORE, totaling 525.6 million tokens. Previously, a large number of tokens were distributed through the Satoshi App airdrop event, enhancing users' long-term engagement and continuous contributions.

The Q2 airdrop plan will unlock 24.7 million $CORE, of which 17 million will reward participants, continuously driving user engagement.

Corn: Points derivative gameplay efficiently attracts BTC LST market liquidity

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as a gas fee and economic incentive tool, aimed at unifying the interests of users, developers, and liquidity providers. The core of the Corn incentive mechanism lies in the veCHAIN model, where CORN token stakers determine the distribution of network rewards.

Currently, Corn has not yet launched its mainnet, but it has effectively attracted $425.8M in deposits through joint deposit activities, significantly surpassing the BTC expansion layers that have already gone live, such as Merlin and BSquared. The deposits are primarily concentrated in pools launched on Pendle in collaboration with several BTC LSTs, including LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, accounting for 85% of the current total TVL.

Leading BTC LST point derivative gameplay in collaboration with Pendle

The points derivative market is one of the key strategic scenarios for BTC LST as an interest-bearing asset. Pendle started to integrate various BTC LSTs at the beginning of September. Currently, Corn, Pendle, and BTC LST collaborate to support five major BTC LST assets:

• LBTC ($41.5M TVL, $1.1M 24h Volume)
• SolvBTC.BBN ($97.5M TVL, $300K 24h Volume)
• eBTC ($20.2M TVL, $658.4K 24h Volume)
• PumpBTC ($60.5M TVL, $437K 24h Volume)
• uniBTC ($70.6M TVL, $20.8K 24h Volume)

The BTC LST market accounts for 11.4%, and the collaboration of multiple parties has generated a good synergistic effect.

For BTC LST holders, the points leverage market offers a variety of strategic gameplay, and Pendle has become a major application scenario accounting for 10%-30% of the total supply of BTC LST. Corn provides maximum multiplier point incentives for these pools, further attracting holders to participate.

For Corn, BTC LST is a core contributing factor in driving TVL growth in the early stages. Currently, these pools are the only applications generating external benefits in Corn's points mining activity, laying the foundation for the future mainnet launch.

TVL BootStrap Campaign

In the current points mining design of Corn, users receive 1 Kernel point for every $1 worth of assets deposited every 210 minutes. Deposits can be withdrawn at any time without penalties or fees, providing great flexibility. This activity aims to attract initial liquidity through Kernel point incentives.

However, currently, aside from the BTC LST pool that has generated actual benefits through cooperation with Pendle, other deposits have not brought more value to the network. The flexibility of withdrawing deposits at any time also brings short-term mining risks, which may lead to the inflation of Corn points and dilute the expected value distributed to individuals.

BOB: Secure bridging and a strong ecosystem help to consolidate assets

BOB is an innovative hybrid Layer 2 network that combines the advantages of Bitcoin and Ethereum. By utilizing Ethereum smart contracts and EVM features, it employs rollup technology to enhance transaction processing capacity and scalability. BOB's final transaction confirmation is completed on the Bitcoin blockchain, benefiting from the high security assurance of the BTC PoW consensus mechanism. Currently, BOB's total TVL reaches $65.7M, with its asset composition mainly derived from $WBTC.

The growth performance of the BOB ecosystem over the past six months is attributed to:

1. The bridging architecture addresses the issues of trust and liquidity fragmentation.
2. BTC (re) staking narrative introduces one-click liquidity staking service
3. Strong market force and ecological cooperation

Liquidity Staking Service and Ecological Integration

BOB Stake integrates multiple liquid staking service providers and DeFi platforms, utilizing the BOB Gateway to complete multi-protocol staking in a single Bitcoin transaction. Users can stake BTC to multiple LST protocols with one click, reducing time and costs. BOB Stake also deeply integrates user-staked LST with DeFi protocols, becoming a convenient entry point for BTC liquid staking and DeFi applications.

BOB Stake integrates multiple staking protocols centered around Babylon staking, supporting SolvBTC.BBN, uniBTC, PumpBTC, and other LSTs. BOB has become the preferred BTC staking platform for multiple aggregators and wallets.