Bitcoin-based decentralized finance (BTCFi) has witnessed a massive surge in total value locked (TVL) over the past year, but skepticism around trust and security continues to challenge adoption.
BTCFi TVL Grows 22x in 12 Months
As of July 2025, data shows that BTCFi TVL stands at $7.05 billion, up dramatically from just $304.66 million on January 1, 2024. This represents an astonishing 22-fold increase within 18 months, marking one of the most significant growth periods in the Bitcoin DeFi ecosystem to date.
New protocol launches, institutional capital inflows, and Bitcoin’s price rally have been the primary drivers of this growth.
The expansion is also being fueled by emerging token standards and the rise of liquid restaking, creating new layers of utility for Bitcoin holders.
Adoption Still Limited by Trust and Risk Concerns
Despite this surge, many users remain on the sidelines. A recent report by Arch Network reveals that:
- 36% avoid BTCFi due to lack of trust
- 25% cite fear of losses and risk as major deterrents
- 60% believe smart contract exploits pose the greatest security threat
Security and reliability remain major concerns, especially for institutions and conservative users.
This highlights that while the infrastructure is improving, user confidence has not kept pace with TVL growth.
Infrastructure and Development Challenges Remain
Unlike Ethereum and other altcoin ecosystems, building DeFi protocols on Bitcoin still faces major hurdles. According to the same survey:
- 43% believe limited smart contract support is the top challenge
- 45% cite the need for better infrastructure to scale BTCFi
- 34% point to liquidity constraints as a major barrier
Wider adoption of Bitcoin layer-2 solutions is seen as critical to addressing these challenges and unlocking scalability.
How BTCFi Users Engage with Bitcoin
BTCFi participants are using Bitcoin in various ways:
- 36% store BTC in cold wallets
- 33% trade on centralized exchanges
- 29% use BTC as DeFi collateral
- 22% bridge BTC to other blockchains as wrapped tokens
The data reflects a growing diversification in Bitcoin use cases, but also underscores the need for more user-friendly and secure BTCFi platforms.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.