In the rapidly evolving landscape of decentralized finance (DeFi), the integration of Bitcoin's vast liquidity with the high-performance capabilities of emerging blockchains like Sui presents a compelling opportunity. This fusion aims to harness the strengths of both networks, enabling seamless, secure, and efficient financial operations without the need for wrapping or bridging Bitcoin assets.

The Rise of Bitcoin in DeFi

Traditionally, Bitcoin has been primarily viewed as a store of value, with limited participation in DeFi activities such as lending, yield farming, and liquidity provision. However, recent developments have expanded Bitcoin's role in the DeFi ecosystem.

Notably, the total value locked (TVL) in Bitcoin DeFi has experienced a remarkable surge, increasing over 2,000% in 2024—from $307 million in January to over $10+ billion by December. In BTC terms, this is still small - less than 1%. However, this growth underscores a burgeoning interest in leveraging Bitcoin's liquidity within decentralized financial applications.

BTCFi will mainly happen on established chains because:

1. Bitcoin ecosystems are struggling – Despite the excitement around BTCFi, Bitcoin-native ecosystems face challenges in adoption, liquidity, and developer activity. Many are still in their early stages, lacking the robustness needed to support large-scale DeFi.
2. Established chains like Sui, Solana, etc., are growing rapidly – These chains are seeing significant growth in both users and capital. They already have the infrastructure, liquidity, and developer ecosystems to support BTCFi use cases seamlessly.
3. Efficiency matters – Chains like Solana and Sui offer higher throughput, lower fees, and better UX, making them more attractive for BTCFi applications than solutions built directly on Bitcoin’s slower and more expensive base layer.

Essentially, BTCFi will thrive where the conditions are best for DeFi—on high-performance chains with strong ecosystems, rather than struggling to build entirely new Bitcoin-native solutions.

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Bitcoin’s L2 solutions aim to expand its functionality beyond simple transactions, but they face significant hurdles in supporting BTCFi compared to Ethereum, Solana, or Sui.

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Limited Programmability

Bitcoin’s base layer has a deliberately restricted scripting language, prioritizing security and simplicity over flexibility. While L2 solutions like the Lightning Network excel at fast, cheap payments, they lack the programmability required for complex DeFi applications. Stacks and Rootstock (RSK) introduce smart contract capabilities, but their functionality remains less versatile than Ethereum’s EVM or Solana’s runtime environment, limiting the scope of DeFi innovation.

Immature Ecosystem

Bitcoin’s L2s are still developing their DeFi infrastructure. The Lightning Network, for instance, is payment-focused rather than DeFi-ready, while Stacks and RSK have yet to attract the developer mindshare and user adoption seen on Ethereum or Solana. These platforms lack the breadth of tools, dApps, and interoperability mechanisms—such as mature bridges or wrapped token standards—that make DeFi accessible and efficient on other chains.

Liquidity Gaps

Liquidity is the lifeblood of DeFi, enabling efficient trading and lending. Ethereum and Solana have amassed significant liquidity in their DeFi ecosystems, dwarfing that of Bitcoin’s L2s. Without comparable liquidity pools, Bitcoin L2s struggle to support robust DeFi applications, reducing their appeal for BTCFi.

Developer and User Traction

Ethereum and Solana benefit from large, active developer communities that drive continuous innovation in DeFi. Their extensive development tools and resources lower the barrier to building and deploying protocols. In contrast, Bitcoin’s L2s have not yet captured the same level of developer attention, slowing their progress in creating a competitive DeFi landscape. For users, the polished experience on Ethereum and Solana—supported by established wallets and interfaces—outshines the still-evolving offerings on Bitcoin L2s.

Bitcoin’s L2s do have strengths, notably their ability to leverage Bitcoin’s unmatched security and decentralization. Innovations like the Taproot upgrade and projects like Stacks signal a future where BTCFi could thrive on Bitcoin-native platforms, appealing to purists who value trustlessness over convenience. However, these solutions are still maturing and lack the momentum of their competitors. Even with Bitcoin’s massive market cap and user base, DeFi requires more than a strong foundation—it demands a robust ecosystem, which Ethereum and Solana currently provide.BTCFi boom is less likely to happen on Bitcoin’s L2s due to their established DeFi ecosystems, superior technical capabilities, and greater liquidity and developer support.

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Sui: A High-Performance Blockchain

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Sui emerges as an advanced platform designed to address scalability and performance challenges inherent in many blockchain networks. Engineered with an object-centric model and parallel transaction execution, Sui has demonstrated the capability to process up to 297,000 transactions per second (TPS) under fast pay transactions.This performance is complemented by a swift time to finality of approximately 480 milliseconds, ensuring rapid and efficient transaction processing.

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The integration of Bitcoin into the Sui blockchain offers a harmonious blend of liquidity and speed. By enabling Bitcoin holders to engage directly with DeFi applications on Sui, users can capitalize on:

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• Enhanced Security: Utilizing Bitcoin natively within Sui’s DeFi ecosystem eliminates the risks associated with wrapped tokens and third-party custodians.

• Improved Efficiency: Sui’s high throughput and low latency facilitate seamless financial operations, from simple transfers to complex smart contract executions.

• Decentralization: Maintaining the decentralized ethos of both networks ensures trustless interactions without centralized intermediaries.

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Native makes it happen by using the groundbreaking cryptography. Thanks to our symbiosis with @Ikadotxyz, we leverage 2PC-MPC to build a Bitcoin abstraction for Sui. With that, the Sui ecosystem will gain trustless, permissionless access to Bitcoin, without compromising on security nor decentralization.

Conclusion

The convergence of Bitcoin’s liquidity with Sui’s high-performance infrastructure marks a pivotal advancement in the DeFi landscape. This integration not only amplifies the utility of Bitcoin beyond a mere store of value but also leverages Sui’s technological prowess to deliver secure, efficient, and decentralized financial services.

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