tl;dr
- BTCfi is red hot, evidenced by Babylon Labs’s attraction of $1.3 billion in BTC staking deposits in just a few days.
- With BTCfi thriving, dozens of BTC variants are emerging across multiple L2s and sidechains.
- While the innovation is excellent, the siloed liquidity is causing fragmentation, which hinders the growth of BTCfi.
- Persistence One is here to solve fragmentation through an intents-based cross-chain BTC swapping solution.
As BTCfi continues to make waves in the industry, the number of BTC variants continues to skyrocket. The introduction of the SegWit (2017) and Taproot (2021) network upgrades laid the foundations for Bitcoin Season 2 to thrive, and we see its effects in today’s BTCfi ecosystem.
With the number of BTC variants rising, we wanted to examine why every L2 and sidechain project wants its own BTC variant and how it’s fragmenting the BTCfi world. Fortunately, we have the perfect solution lined up for this fragmentation: unifying the BTCfi world through seamless cross-chain swaps, similar to the DeFi world today.
Why Does Every Project Want Its Own BTC Variant?
The BTCfi world is undoubtedly red hot. Innovative protocols like Babylon’s BTC staking ecosystem have created a flurry of excitement in the BTC ecosystem as it transforms the number-one-ranked cryptocurrency’s value proposition from a simple store of value to a true yield-generating asset.
Babylon launched its second staking cap in October 2024. In just a few days, it attracted almost 23,000 BTC—worth an incredible $1.3 billion—in deposits, demonstrating the bullish sentiment and confidence driving the BTCfi world.
The introduction of the aforementioned Bitcoin network improvement protocols created a framework for developers to finally build on Bitcoin, creating a fresh wave of innovation in the market.
Over the past three years, dozens of L2s and sidechains have emerged, all with a goal to improve Bitcoin’s scalability or programmability (or both). These L2s (or sidechains) create additional layers on top of the Bitcoin network to introduce new blockchain features. While some enhance transaction efficiency through technology such as rollups, others introduce frameworks for developers to build DeFi dApps on top of the Bitcoin network.
As these L2s and sidechains are built outside the main BTC blockchain, many choose to utilize their own BTC variants, which introduce new features to the BTCfi world.
The following list contains just a few of the many prominent Layer 2s or side chains on the market right now with their BTC derivative:
- Stacks – SBTC and xBTC (wrapped Bitcoin)
- Rootstock – rBTC
- Liquid Network – L-BTC
- FBTC – FBTC
- Ren – renBTC
- Interlay – iBTC
- Merlin – mBTC
Each of these BTC variants introduces unique features that allow BTC holders to easily move in and out of the Bitcoin L2s.
However, it doesn’t stop there.
While some L2s and sidechains introduce their own BTC variants as separate tokens, a handful of protocols utilize a wrapped variant of BTC on their network. For example, Build on Bitcoin leverages WBTC or tBTC on its network to pay for gas fees. This creates another silo of BTC Variants that are spread across different chains.
Finally, a handful of tokenized (wrapped) versions of BTC are also released by major entities, such Coinbase’s cbBTC.
With all these BTC variants emerging in the BTCfi world, they all face one problem: fragmentation.
Siloed Liquidity: Is the Wave of Variants Causing Fragmentation?
Despite the impressive traction witnessed in the BTCfi world over the past few months, fragmentation is keeping the sector from reaching its true potential.
All the BTC variants exist in pools of siloed liquidity and aren’t easily swapped across multiple blockchains. For example, multiple operations are required for a user to move liquidity from sBTC into mBTC (or vice versa), creating friction for users who want to explore opportunities across multiple L2s.
Providing an outlet for users to move around different variants of BTC is essential for accelerated adoption. Interoperability will broaden access to opportunities within the BTCfi world and allow developers and users to choose how they want to interact with the sector without being restricted to one pool of liquidity on one chain.
This is where Persistence One steps in with its cross-chain BTC swapping solution, powered by intents.
Persistence One BTC Cross-Chain Interoperability Here to Solve Fragmentation
Persistence One is building a cross-chain BTC interoperability solution that aims to reduce the fragmentation seen in the BTCfi world. We’re on a mission to build the infrastructure these BTC variants require to enable seamless cross-chain swaps across multiple ecosystems.
The Persistence One solution will leverage ‘intents’, which allow users to specify the transaction’s outcome and experts to use unified liquidity to facilitate it. Intent-based cross-chain swaps will provide instant finality, zero slippage, a seamless UX, zero honeypots, and faster swaps.
We aim to become a major venue for moving all forms of Bitcoin across multiple blockchains and unlock the siloed liquidity in the BTCfi world today. With our testnet in development, follow our social media accounts to be updated on its release.
About Persistence One
Persistence One is building a Bitcoin interoperability solution to enable cross-chain BTC swaps across Bitcoin Layer 2s.
The rapid rollout of Bitcoin L2s and side chains has led to fragmentation, hurting BTCfi scalability. Using the power of intents, Persistence One will enable users to move assets across Bitcoin Layer 2s more efficiently than traditional bridging, offering fast, secure, zero-slippage cross-chain swaps.
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