Bitcoin DeFi is no longer a fringe experiment.
A new report by Arch Network, shared with CoinDesk, shows that the total value locked (TVL) in Bitcoin-native protocols has surged from $307 million in January 2024 to $6.36 billion by mid-2025 — a 20-fold increase driven by lending apps, stablecoins, and institutional inflows.
The data, gathered from 125 developers, investors, and users across Asia and Africa, paints a picture of a shifting narrative away from “digital gold” and toward programmable, yield-bearing bitcoin
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Lending and borrowing protocols are the most frequently cited usage protocols, mentioned by 59% of the respondents.
Bitcoin-backed stablecoins followed (41%), then DEXs (32%) and real-world assets like tokenized real estate (29%). These aren’t speculative side bets — they’re early signs of product-market fit, especially for users who want access to liquidity without selling BTC.
But trust issues remain. 36% still keep their Bitcoin in cold storage, citing a lack of confidence in current DeFi platforms. Another 25% avoid Bitcoin DeFi due to high perceived risk, while 60% of all respondents flagged smart contract exploits as the top security concern.
“Bitcoin’s true potential lies beyond being a passive store of value,” Arch CEO Matt Mudano wrote in the report. “Unlocking its liquidity is the next frontier.”
Developers are split between optimism and frustration. 44% said they build on Bitcoin because of its unmatched security and decentralization, while 43% also cited limited smart contract functionality as their biggest pain point.
Tooling, composability, and documentation were also cited as major hurdles.
As a result, many Bitcoin DeFi builders are multichain, with 63% also building on Ethereum, 47% on Solana, and 44% on Base.
Nevertheless, nearly half say they plan to become Bitcoin-native in the long term — particularly as new infrastructure, such as ArchVM, a Bitcoin-based virtual machine, promises native smart contracts without the need for bridges, wrapped assets, or trust assumptions.
What’s needed to scale Bitcoin DeFi? Respondents say better dev tooling (45%), wider Layer 2 adoption (43%), and deeper liquidity. Security is non-negotiable, and most developers say they won’t build unless onchain assets are fully auditable and bridges are hardened.
Despite the challenges, investors are watching closely.
“If even a fraction of Bitcoin’s $2 trillion market cap gets productive,” said DPI Capital’s Shahan Khoshafian, “the upside is massive.”
For now, Bitcoin DeFi is where Ethereum was in 2019 — niche, raw, and full of potential. However, if these builders prevail, BTC won’t just be held. It’ll be used.
