In a significant move to enhance Bitcoin’s functionality within decentralized finance, Starknet, a Layer 2 (L2) network, has announced the rollout of several new initiatives aimed at establishing itself as the primary execution layer for Bitcoin. These initiatives include Bitcoin (BTC) staking, an institutional-grade BTC yield product, and an expansive incentive program worth 100 million STRK tokens.
During the Token2049 event held in Singapore on September 30, Starknet revealed its launch of Bitcoin staking on its network. This innovative feature allows users to stake BTC alongside STRK, offering rewards while maintaining custody of their assets. The initiative has been touted as the “first fully trustless BTC staking on any L2,” aligning with Starknet’s vision of scaling Bitcoin through zero-knowledge (ZK) technology that facilitates private transactions securely.
In supporting this initiative, Re7 Capital, which manages a fund exceeding $1 billion, has introduced a BTC-denominated yield fund on Starknet. This move is tailored to encourage institutional adoption of Bitcoin within the Starknet ecosystem.
The drive to enhance Bitcoin’s presence in decentralized finance (DeFi) also includes collaboration with various contributors, such as WBTC, Lombard, Solv, Threshold Network, PumpBTC, Bitlayer, and Bedrock. These partners will provide avenues for engaging with DeFi and accessing cross-chain markets. Additionally, the project sees involvement from cross-chain infrastructure firms like LayerZero, Hyperlane, Rhino.Fi, and Atomiq.
Starknet’s recent announcement addressed challenges previously encountered in BTC staking on L2 networks, notably security and scalability risks. By allowing BTC stakers to not only earn rewards but also help secure the network and attest transactions, the initiative aims to redefine the operational landscape for holding Bitcoin in a decentralized manner.
Current data suggests that Starknet is positioned as the seventh-largest Ethereum rollup, securing over $625 million in total value on-chain, while Arbitrum leads the pack with over $19.8 billion. In an effort to stimulate activity around Bitcoin on its network, the Starknet Foundation is distributing 100 million STRK tokens, valued at approximately $13 million. This initiative, termed “BTCFi Season,” has already positively impacted the price of Starknet (STRK), which saw nearly a 9% increase following the announcement.
In the broader context, total value locked (TVL) in Bitcoin’s DeFi sector has seen substantial growth recently, nearly doubling earlier this year, primarily driven by the staking platform Babylon, which currently holds a dominant position in BTCFi TVL with $6.6 billion out of a total $8.45 billion. At the same time, the native assets in Bitcoin DeFi protocols are reported to have a total market capitalization of around $1.72 billion, with Pendle Finance’s PENDLE accounting for a significant portion at $780 million.
As Starknet prepares to unveil further technical details concerning its Bitcoin DeFi initiatives later this week, the cryptocurrency community remains eager to assess the impacts of these advancements on both the L2 landscape and the traditional Bitcoin ecosystem.
