Bitcoin DeFi Surges 20x as Yield Apps Gain Traction, Redefining Network Utility
Bitcoin’s role as a yield-generating asset is accelerating fast, with developers building decentralized finance (DeFi) infrastructure atop the world’s largest crypto network.
A new report from Arch Network, shared with CoinDesk, shows that total value locked (TVL) in Bitcoin-native DeFi protocols has soared from just $307 million in January 2024 to $6.36 billion by mid-2025 — a 20-fold increase. The growth has been fueled by demand for lending protocols, stablecoins backed by BTC, and rising institutional interest.
Surveying 125 developers, investors, and users from Asia and Africa, the report reveals a clear shift in sentiment: bitcoin is evolving from a “digital gold” narrative into a programmable asset with yield potential.
Lending and borrowing platforms emerged as the dominant use case, cited by 59% of participants. Bitcoin-collateralized stablecoins were next (41%), followed by decentralized exchanges (32%) and tokenized real-world assets like real estate (29%).
These aren’t side experiments — respondents described growing product-market fit, especially among users seeking liquidity without selling their BTC.
Still, trust is an obstacle. 36% of users continue to store their BTC in cold wallets due to low confidence in DeFi security. Another 25% view Bitcoin DeFi as high risk, and 60% flagged smart contract vulnerabilities as the top concern.
“Bitcoin’s next frontier is liquidity,” said Arch CEO Matt Mudano. “Its true potential lies not in passive holding, but in active participation.”
Developers echoed that mix of excitement and limitation. While 44% cited Bitcoin’s unmatched security and decentralization as the main reason to build, 43% expressed frustration with its limited smart contract capabilities. Poor tooling, documentation, and lack of composability were also cited as major friction points.
As a result, most Bitcoin DeFi developers are multichain: 63% also deploy on Ethereum, 47% on Solana, and 44% on Base. Still, nearly half indicated they plan to become Bitcoin-native long-term — particularly with the emergence of new infrastructure like ArchVM, a Bitcoin-based virtual machine designed to enable native smart contracts without bridges or wrapped assets.
Asked what’s needed to scale Bitcoin DeFi, developers pointed to improved dev tooling (45%), broader L2 adoption (43%), and deeper liquidity. Security was the non-negotiable requirement — most agreed projects won’t gain serious adoption unless on-chain assets are auditable and bridges are robust.
Despite growing pains, institutional interest is climbing.
“If even a small share of Bitcoin’s $2 trillion market cap is put to work,” said DPI Capital’s Shahan Khoshafian, “the upside for DeFi is immense.”
For now, Bitcoin DeFi is still in its early stages — reminiscent of Ethereum’s DeFi ecosystem in 2019: raw, experimental, and full of untapped potential. But with builders leaning in, the Bitcoin network may soon evolve into a powerful foundation for decentralized financial activity.
