Analysis of BTCFi Ecological Asset Accumulation Strategy

With the evolution of the BTCFi narrative, the on-chain liquidity of Bitcoin assets has become the focus of various ecosystems and protocols. BTC is transitioning from a static value store to an asset that can participate in more on-chain yield scenarios, enhancing its application potential within the DeFi ecosystem.

Core, BOB, and Corn are representative growth cases in the BTCFi field for the second half of the year: Core focuses on large-scale BTC LST assets during the growth phase; Corn quickly seizes the incremental market by launching points derivative gameplay; BOB attracts liquidity through enriched ecology and liquid staking services. The series of actions around "yield generation" in each ecology 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 ecology still has enormous growth potential.

Background

BTC asset flow path on the blockchain

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

1. Native BTC
2. Wrapped BTC issued based on centralized custody, mapping assets running on BTC L2 and SideChain, liquid staking BTC
3. BTC derivative assets in various downstream DeFi scenarios

The current state of the BTC asset market ###.

Based on the issuance of BTC-pegged assets on the Ethereum, Arbitrum, and BNB networks, centralized custodial issuance of wrapped BTC still holds the majority market share, with WBTC and BTCB accounting for over 75% of the total circulation of BTC-pegged assets. In addition, BTC LSTs such as LBTC and SolvBTC.BBN have seen rapid growth in recent months, becoming another emerging force in the BTC-pegged asset market.

As the highest consensus and largest market capitalization asset, the main application scenarios of BTC pegged assets are concentrated 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 from large funds for relatively stable returns in the BTCFi sector.

Currently, the market total of BTC LST is approximately 25.1K BTC, with the two major protocols Lombard and Solv Protocol occupying over 70% of the market share. The absorption and issuance of BTC LST directly affect the flow and accumulation of BTC assets on various chains. Solv's impact on the TVL of each chain is particularly significant, bringing a net inflow of $309.7M and $177.8M to Core and Scroll respectively, significantly enhancing the asset scale of these two chains.

Compared to the centralized custody model for issuing wrapped BTC, BTC LST as an income-generating asset has expanded into richer application scenarios. In addition to lending protocols, the points trading market has become another important downstream application for BTC LST. Avalon and Pendle are the protocols with the highest accumulation of BTC LST funds in the "lending" and "points derivative market" sectors, achieving win-win growth alongside the development of BTCFi and BTC staking narratives.

BTCFi Ecosystem's Asset Accumulation Strategy

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

Core is an L1 scaling solution powered by BTC that allows users to earn passive income through non-custodial Bitcoin staking. Since its launch in April 2024, over 7,500 BTC have been staked on Core. In July 2024, Core launched a dual staking mechanism for BTC and CORE.

Currently, Core's TVL has reached $591.5M, with a 4757.9% growth over six months, ranking it as the 16th blockchain in terms of TVL. The growth of Core's TVL shows several key milestones: In June, the launch of the native lending protocol Colend and the integration with Solv Protocol's derivative assets propelled a TVL increase of $51.1M for the month. In July, the introduction of the dual staking mechanism attracted new capital inflows, leading to a TVL increase of $92.6M for the month. In August, the integration of the BTC Restaking leading protocol Pell Network into Core further triggered a larger scale of capital accumulation.

The growth of Core TVL is primarily driven by the following factors:

1. Focus on the incremental market of BTC-pegged assets to enhance ecosystem liquidity and absorb the rapidly growing Solv derivative assets.
2. Build supporting native protocols such as Colend and quickly integrate with projects like Pell Network to establish a complete ecological application.
3. Utilize the airdrop of the native token $CORE and market performance to support the incentive structure, forming a multi-dimensional ecological synergy.

Deep integration and collaboration with Solv derivatives assets: SolvBTC.BBN and SolvBTC are currently the fifth and sixth largest BTC derivative assets in the market, with a total issuance of 15.6K BTC, and are still in a stable growth phase. Since June, SolvBTC has expanded to the Core ecosystem and has deeply integrated with two major protocols, Colend and Pell Network, driving a TVL increase of $51.1M that month. Currently, Solv derivative assets account for 65% of Core's TVL, which is not only due to the DeFi module construction of the Core ecosystem providing stable income scenarios for underlying assets, but also includes high incentives provided by Core for SolvBTC applications and the airdrop expectations supported by the performance of the $CORE token.

BTCFi ecosystem development led by Colend and Pell Network: Colend is the native lending protocol on Core, taking on a significant portion of the asset accumulation within the ecosystem. Since the introduction of SolvBTC in June and providing maximum incentives, its TVL has grown significantly. Currently, 85% of the TVL in the Colend protocol comes from the inflow of derivative assets from the Solv Protocol, demonstrating its strong synergy with Solv. Additionally, Colend is also a core application scenario for CORE token derivative assets, absorbing $17.4M of wCORE and $5.2M of stCORE.

In August, Pell Network, the leading project of BTC Restaking, quickly promoted the growth of ecological TVL after going live on Core, with inflowing assets still mainly coming from Solv Protocol, which has deposited Solv derivative assets valued at $108.3M. In terms of project incentives, Pell Network provides the highest multiple points rewards support 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 the Pell Network protocol within the Core ecosystem. As of now, Pell Network's cumulative TVL has reached $271.7M, with nearly half of the contribution coming from the Core ecosystem.

Incentive structure supported by the airdrop and market performance of the native token $CORE: In May 2024, Core launched the Sparks incentive program, aimed at accelerating the adoption and expansion of the ecosystem by rewarding on-chain contributors. The second season is currently underway. Unlike projects that rely on point incentives and unclear token issuance expectations, Core launched its native token $CORE back in 2023 and successfully completed its initial airdrop, laying a solid foundation for a large community. $CORE, as the ecosystem's native token, is primarily used for paying transaction fees, network staking, obtaining 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 activity conducted via the Satoshi App, enhancing users' long-term attention and continuous contributions to its ecosystem. The second season airdrop plan will unlock 24.7 million $CORE, with 17 million allocated for rewarding participants, continuously driving user enthusiasm for participating in the Core ecosystem.

Corn: Points-based derivative gameplay effectively attracts BTC LST market liquidity

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as gas fees and economic incentive tools, aiming to unify the interests of users, developers, and liquidity providers. The core of Corn's incentive mechanism lies in the veCHAIN model, where the stakers of the CORN token will determine the distribution of network rewards.

Currently, Corn has not yet launched its mainnet, but it has effectively attracted $425.8M in funds through a deposit activity jointly launched by multiple parties, significantly surpassing BTC scaling layers that are already online, such as Merlin and BSquared. These deposits are mainly concentrated in pools jointly launched on Pendle with several BTC LSTs including LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, accounting for 85% of the current total TVL.

The growth strategy of Corn mainly includes:

1. Leading BTC LST points derivative gameplay in collaboration with Pendle

The points derivatives market is one of the key strategic scenarios for BTC LST as an interest-generating asset. As the leading protocol in this sector, Pendle initiated the integration of various BTC LSTs at the beginning of September. Currently, the collaboration between Corn, Pendle, and BTC LST supports 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), which accounts for 11.4% of the total BTC LST market volume, and the collaboration has generated a positive synergistic effect.

For BTC LST holders, the points leverage market offers a variety of strategic gameplay, with Pendle becoming a major application scenario accounting for 10%-30% of the total supply of BTC LST. Additionally, Corn provides maximum multiplier point incentives for these pools, further attracting more holders to participate. For Corn, BTC LST is a core contributing factor in driving TVL growth during its early stages. Currently, these pools are the only applications generating external benefits in Corn's point mining activities, laying the foundation for its future mainnet launch.

2. TVL BootStrap Campaign

In the existing points mining design of Corn, users can earn 1 Kernel point for every $1 worth of assets deposited every 210 minutes. These deposits can be withdrawn at any time without incurring any penalties or fees, providing great flexibility. The goal of this activity is to attract initial liquidity through Kernel point incentives. However, currently, apart from the actual benefits generated by the BTC LST pool in collaboration with Pendle, other deposits have not brought more value to the network. The flexibility of withdrawing deposits at any time also brings risks of short-term mining, which may lead to the inflation of Corn points and dilute the expected value allocation to individuals.

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

BOB is an innovative hybrid Layer 2 network that combines the advantages of Bitcoin and Ethereum. It utilizes Ethereum smart contracts and the features of EVM, and employs rollup technology to enhance transaction processing capability and scalability. At the same time, the final transaction confirmations of BOB are completed on the Bitcoin blockchain, benefiting from the high security provided by the BTC PoW consensus mechanism. Currently, the total TVL of BOB has reached $65.7M, with the asset composition mainly coming from $WBTC.

Based on the bridge architecture that solves the trust and liquidity fragmentation issues, the growth performance of the BOB ecosystem over the past six months has also benefited from the timely launch of one-click liquidity staking services under the narrative of BTC (re) staking, as well as strong market forces and ecological collaborations, which have collectively driven the growth of the ecosystem.

1. Liquidity Staking Service and Ecological Integration

BOB Stake integrates multiple liquid staking service providers and DeFi platforms, utilizing the BOB Gateway to enable multi-protocol staking with a single Bitcoin transaction. Through BOB Stake, users can stake BTC to multiple LST protocols with one click, reducing time and costs. In addition, BOB