“If you deposit Bitcoin, you earn money like interest”… 5.6 trillion won[블록체인 NOW] By Decenter

As Bitcoin has been breaking new highs every day since the U.S. presidential election, attention is also focused on the Bitcoin decentralized finance (DeFi) market. Staking, in which you receive profits like interest by depositing Bitcoin, is a representative Bitcoin DeFi service. Previously, Bitcoin served as a means of storing value, but its utilization is increasing as the ecosystem expands through a ‘derivative service’ called Bitcoin staking.

According to DeFiRama, the total assets (TVL) deposited in the Bitcoin network exceeded $4 billion (approximately KRW 5.624 trillion) on the 14th. Bitcoin network TVL is the sum of Bitcoins used in various DeFi services based on Bitcoin, such as staking, payments, and lending. Bitcoin staking is cited as the reason why the network size, which was only $300 million (approximately 422.2 billion won) at the beginning of this year, has increased more than 10 times in less than a year. Staking is a service where you deposit Bitcoin and receive a return on profits, just like depositing cash in a bank and receiving interest. Bitcoin entrusted by investors is used in blockchain verification work and contributes to strengthening security. The compensation for this is staking profits. Ethereum and Solana can also use this staking service. For example, if you deposit 32 Ethereum, the minimum staking amount, on the Ethereum blockchain, you will be paid an annual interest rate of 3.6% (as of the 13th).

Until last year, Bitcoin staking was an impossible area. This is because, unlike other blockchains such as Ethereum and Solana, it does not have a smart contract function, making it difficult to build a DeFi service. A smart contract is a blockchain-based contract that automatically executes code when certain conditions are met. This is an essential function for DeFi services without intermediaries such as banks and securities companies. DeFi is a foundation for creating various financial services, such as virtual asset deposits and loans, without an intermediary because it is based on blockchain technology where all transaction details are recorded and can be verified by anyone.

Another obstacle was that Bitcoin’s network runs on proof-of-work (PoW), making staking difficult. Unlike the proof-of-stake (PoS) method, which obtains block creation rights based on the amount of staking, the PoW method creates blocks through calculation (mining) using computing power. Bitcoin is an asset that does not inherently support staking. On the other hand, Ethereum changed its block creation method to PoS through an upgrade two years ago and introduced a staking function.

As such, Bitcoin was a representative virtual asset but had low usability, but a breakthrough was achieved with the launch of Babylon, a Bitcoin staking protocol. Babylon, founded in 2022 by Professor David Che and Dr. Fisher Yu of Stanford University, designed a protocol that allows PoS chains to use not only their own virtual assets but also Bitcoin for staking. Afterwards, Babylon received staking twice in August and October, accumulating 23,857 bitcoins (equivalent to 3 trillion won). Even though the specific interest rate has not yet been determined, investors who saw the potential of Bitcoin staking flocked to it.

The third staking fund raising is scheduled for early next month. Jang Kyeong-pil, head of Xangle Research Center, said, “There are still problems to be solved from the perspective of institutional investors, such as interest rates may not be high due to the small size of other PoS chain ecosystems compared to Bitcoin market capitalization, and stability verification takes time,” adding, “Deregulation and “If technological advancements allow traditional financial companies to use DeFi, such as staking, it will have a positive impact on Bitcoin demand,” he predicted. He added, “In addition to Babylon, the ecosystem is expanding as new attempts continue to be made on Bitcoin, such as Ordinals, Loon, and the Lightning ecosystem, and will accelerate with the strength of Bitcoin.”

sBTC, a virtual asset linked one-to-one with the value of Bitcoin, is also expected to increase the usability of Bitcoin. sBTC is a virtual asset designed by Stacks, an American blockchain company, to be linked one-to-one with the value of Bitcoin, and is scheduled to be issued early next month. Since no fees are charged during the conversion process between Bitcoins, it is expected to be highly utilized in various DeFi services. Kyle Ellicott, CEO of Stacks Asia Foundation, said, “Bitcoin was in its infancy for 12 years from 2009 to 2021, but now that various activities such as lending, leasing, and profit generation are possible, interaction goes beyond simple storage of value. “It has become a viable asset,” he explained. He emphasized, “The growth of DeFi will increase the usability of Bitcoin in the entire virtual asset ecosystem, leading to more capital and user participation.”

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