Starknet, the Ethereum Layer 2 solution, is making waves in the crypto space with the introduction of its latest initiatives aimed at enhancing Bitcoin’s role in decentralized finance (DeFi). During the Token2049 conference held in Singapore on September 30, the network unveiled its plan for Bitcoin staking, a new BTC yield product for institutional investors, and a significant incentive program allocating 100 million STRK tokens.
The newly launched BTC staking mechanism allows users to stake their Bitcoin on Starknet’s network, facilitating the generation of rewards without the need to relinquish control over their assets. Starknet claims this to be the “first fully trustless BTC staking on any L2,” underscoring its ambition to serve as a critical execution layer for Bitcoin. The initiative leverages zero-knowledge technology, commonly referred to as ZK tech, to bolster Bitcoin’s scalability and enable private transactions.
Backing this groundbreaking initiative is Re7 Capital, which manages an impressive fund exceeding $1 billion. They are introducing a BTC-denominated yield fund on Starknet, aimed specifically at promoting institutional investments in Bitcoin within the network’s ecosystem.
The Bitcoin DeFi initiative, dubbed BTCFi, represents a collaborative effort involving prominent contributors such as WBTC, Lombard, Solv, Threshold Network, PumpBTC, Bitlayer, and Bedrock. These partners will work to enhance accessibility in DeFi and facilitate cross-chain market transactions. Additionally, firms specializing in cross-chain infrastructure—such as LayerZero, Hyperlane, Rhino.Fi, and Atomiq—are collaborating on this significant project.
In contrast to earlier endeavors regarding Bitcoin staking on Layer 2 platforms, which often encountered various limitations—ranging from security vulnerabilities to scalability challenges—Starknet aims to offer a seamless experience. Users who stake Bitcoin on the Starknet network will contribute to securing the platform and endorsing transactions, with the promise of earning rewards in return.
While the technical aspects of this update remain somewhat ambiguous, Starknet has indicated that more comprehensive information will become available later this week. Currently, Starknet holds the distinction of being the seventh-largest Ethereum rollup by the total value secured on-chain, boasting over $625 million per data from L2Beat. In contrast, Arbitrum leads with over $19.8 billion.
In a bid to attract new stakers, the Starknet Foundation has set aside 100 million STRK tokens—valued at approximately $13 million—through a campaign termed “BTCFi Season.” This initiative aims to stimulate user engagement and activity around Bitcoin on the Starknet network. Following the announcement, the price of STRK exhibited almost a 9% increase, reflecting enthusiastic market sentiment.
The last two years have seen a dramatic surge in the total value locked (TVL) in Bitcoin-based DeFi applications, with a notable doubling occurring earlier this year, driven primarily by the staking platform Babylon. Currently, Babylon commands a substantial portion of the BTCFi TVL, amounting to $6.6 billion out of a total of $8.45 billion according to data from DefiLlama.
As it stands, the combined market capitalization of native assets within Bitcoin DeFi protocols approaches $1.72 billion. Notably, Pendle Finance’s PENDLE accounts for nearly half of this total, valued at approximately $780 million as per CoinGecko’s data. With Starknet’s ambitious initiatives, the evolution of Bitcoin within the DeFi landscape promises to be a critical focus in the near future.
