Host: Aquarius https://x.com/0xAquariusCap

Guest:

• Clayton Menzel, Head of BD at Babylon https://x.com/babylonlabs_io

• Lester Chui, Institutional Partnership Lead at P2P.org https://x.com/P2Pvalidator

• Makoto, Co-founder at Pell Network https://x.com/Pell_Network

• Jing Xiong, CBO at Solv Protocol https://x.com/SolvProtocol

Youtube:

Highlights

• BTC-Fi’s Unique Value Proposition: Bitcoin staking finance (BTC-Fi) aims to redefine Bitcoin’s role beyond its traditional “store of value” image by enabling yield generation and decentralized finance (DeFi) applications. Unlike other ecosystems like Ethereum or Solana, Bitcoin’s long-standing reputation as the original cryptocurrency gives it a unique advantage in attracting both retail and institutional interest. BTC-Fi may have the potential to disrupt the DeFi space due to Bitcoin’s brand strength and unparalleled decentralization, though it faces technical and adoption hurdles that must be overcome.

• Babylon’s Vision for BTC Security on a Native Level: Babylon is pioneering native BTC staking, allowing users to stake Bitcoin directly on the Bitcoin network, a significant innovation in an ecosystem where native staking has historically been absent. Babylon’s unique positioning as a “staking, security, and liquidity protocol” attracts networks and projects that want to leverage Bitcoin’s network security without needing custodial solutions. Their focus on partnering with Liquid Staking Derivative (LSD) issuers and DeFi developers aims to expand BTC-Fi’s footprint by creating diverse applications on Babylon’s secure, Bitcoin-backed staking layer.

• P2P.org’s Institutional Infrastructure Approach: As a validator and infrastructure provider, P2P.org sees BTC-Fi as a space ripe for institutional engagement but acknowledges that institutional players are still hesitant, waiting for greater regulatory clarity, consistent returns, and proven security. P2P.org secures over 40 Proof-of-Stake (PoS) chains, leveraging their experience to support emerging BTC staking projects like Babylon. For P2P, BTC-Fi adoption will depend heavily on clear communication of security measures and yield potential, especially given Bitcoin’s traditional role as a non-yielding asset.

• Adoption Challenges: Slow but Steady Progress: BTC-Fi adoption has been slower than anticipated, with early adopters mostly coming from the retail side, while institutions remain cautious. A significant challenge is building trust among Bitcoin holders who are accustomed to long-term holding, often in cold storage or traditional custody solutions, rather than staking. For BTC-Fi to gain widespread traction, platforms need to demonstrate both security and tangible, low-risk benefits for users. The current landscape suggests that adoption will take time, but participants believe it could mirror Ethereum’s early DeFi development, which took years to mature.

• Security vs. Fees: A Necessary Trade-Off: High transaction fees on the Bitcoin network remain a barrier for BTC-Fi, but guests agree that security is the foremost priority. Babylon’s solution is a non-custodial staking model that allows BTC to remain within users' wallets, reducing custodial risks. The trade-off here is prioritizing security over transaction fee reduction, a choice that may appeal to Bitcoin holders who value security above all else. Babylon’s future plans involve exploring scalable solutions to bring fees down while maintaining security, but a quick fix isn’t expected.

• Broadening BTC’s Utility Beyond Yield: BTC-Fi projects aim to expand Bitcoin’s utility beyond simply serving as a store of value or a yield-generating asset. Babylon, for example, sees potential in building advanced financial markets on top of their Bitcoin-staked layer, opening up opportunities for lending, borrowing, and other DeFi activities. Pell Network also envisions BTC being used as economic security for various applications, with re-staking offering BTC holders an additional revenue stream. The hope is that these new utilities will eventually redefine how Bitcoin is perceived and used within the crypto space.

• Building a Developer-Friendly BTC Ecosystem: Pell Network’s approach to BTC-Fi focuses on supporting developers and making it easier for them to incorporate Bitcoin security into their applications. By offering a simplified, chain-agnostic infrastructure, Pell aims to lower barriers for developers in all ecosystems to utilize BTC’s security benefits. This developer-centric strategy is viewed as essential to BTC-Fi’s success, as robust developer engagement is likely to drive innovation and expand BTC’s utility across ecosystems.

• The Role of Custodians in Institutional Adoption: Institutional adoption of BTC-Fi remains challenging due to the conservative nature of custodians who manage large Bitcoin holdings. Lester from P2P.org and other guests noted that custodians need to see clear demand and revenue potential before enabling BTC staking. Solv Protocol and Babylon are working to simplify this process, collaborating with custodians to create pathways for BTC staking that meet institutional standards. Progress in this area could catalyze wider adoption as custodians bridge the gap between BTC-Fi protocols and traditional financial institutions.

• Comparing BTC-Fi with Ethereum and Solana: A recurring theme in the discussion was BTC’s unique position relative to Ethereum and Solana, both of which have more established DeFi ecosystems. While Ethereum and Solana offer robust DeFi functionalities, BTC-Fi’s main strength lies in Bitcoin’s unparalleled trust and recognition outside of crypto. As Makoto pointed out, if BTC can integrate secure, scalable DeFi solutions, its sheer market cap could position BTC-Fi as a heavyweight in DeFi. BTC-Fi’s future success could hinge on its ability to leverage Bitcoin’s brand strength while catching up technologically.

• Insights on Future Roadmaps for BTC-Fi Growth: Each guest outlined specific milestones for their projects, with Babylon working towards establishing secure staking solutions for various custodial and wallet partners by early next year. Expanding access to BTC staking through more custodians, like Ledger and Fireblocks, is a priority, as is extending staking windows to accommodate global time zones. Solv Protocol is focusing on scaling user acquisition and ensuring that once users join, there are practical applications for them. The next 12 months are seen as critical for BTC-Fi growth, with expectations that more institutions will begin engaging as infrastructure solidifies.

• Retail as the Gateway to Institutional Adoption: Guests emphasized that the path to institutional adoption likely starts with strong retail adoption. Retail users tend to be more open to experimentation, and their engagement can build the momentum needed to attract larger players. BTC-Fi projects like Pell and Solv are focusing on growing their retail user base to demonstrate the viability of Bitcoin staking. Institutions, they argue, will take notice once BTC-Fi proves itself as a sustainable and secure financial product within the retail space.

• Timeline for BTC-Fi Adoption: Guests are cautiously optimistic about BTC-Fi’s growth trajectory, with Makoto predicting notable institutional progress within 12 months. They believe that infrastructure, integration, and security audits are essential to instill confidence among institutional players. However, BTC-Fi’s timeline is unlikely to mirror the rapid adoption rates seen with more experimental DeFi products on Ethereum or Solana, given Bitcoin’s reputation and the conservatism of its holder base. BTC-Fi growth is expected to be steady, not exponential, as more secure and user-friendly protocols are established.

Introduction

Hazel: Hello everyone, and welcome to the third episode of the Aquarius podcast. I’m your host, Hazel, from Aquarius. Aquarius is a research-driven venture capital and liquid fund with over $600 million in AUM, dedicated to offering projects tailored liquidity management solutions for both short- and long-term needs, including staking and re-staking.

Today, we’re diving into one of the most exciting and rapidly evolving spaces in crypto: BTCFi, or Bitcoin staking finance. With Bitcoin historically viewed as a store of value, BTCFi is transforming its role, enabling holders to generate yield and actively participate in decentralized finance. I’m thrilled to be joined by some incredible guests representing leading projects in BTCFi. Each of these platforms is driving innovation from staking

infrastructure to restaking services. We’ll be discussing their unique approaches, the challenges they’re tackling, and their vision for Bitcoin’s role in DeFi.

To start, let’s get to know each of your platforms a bit better. BTCFi is growing, and protocols like Lido have set standards on the Ethereum side. I’d love to hear how each of you is positioning your platform to stand out in BTCFi and differentiate itself in this ecosystem?

• Clayton: So I think it’s helpful to distinguish between Babylon and the decentralized finance activity that may be happening on top of our layers. Babylon is ultimately a staking, security, and liquidity protocol. For the first time ever, Bitcoin holders can stake Bitcoin natively on the Bitcoin network. What Babylon does as a protocol is offer that staked security to other networks interested in leveraging Bitcoin’s network security. The liquidity aspect comes through our partners, whether they are LSD (Liquid Staking Derivative) issuers or others who want to build DeFi-focused products on our staking layer. Ultimately, our network participants are those looking for security that our staked BTC can provide, as well as stakeholders and developers building financial products atop that staked BTC.

• Lester: P2P.org is more of an infrastructure provider. We’ve been running validators, spinning out different projects, and supporting chains like Cosmos. Our main focus here is providing yield, so projects like Babylon are a fit for us. Along with other projects on Bitcoin, P2P aims to generate yield for BTC holders, a notable shift since Bitcoin traditionally offered no native yield. While some may argue it’s still not truly native yield, moving from zero to one is a big step. P2P.org secures over 40 POS chains, maintaining uptime, API responsiveness, and effectiveness. We’ve been around since 2018, focusing on value-added validator operations for POS chains.

• Jing: First, thanks for having us today on the podcast. We work closely with teams like Babylon and Pell. Conceptually, we see ourselves as building staking infrastructure, providing a one-stop shop for users to access a variety of revenue opportunities across the platform. While Babylon has been leading many of these offerings, we’re also exploring opportunities with higher-risk profiles on the trading side, aiming to make these accessible through liquid staking tokens, where users can continue borrowing, lending, and more.

• Makoto: Yes, happy to be here with Babylon, P2P, and Solv. Pell Network specializes in BTC re-staking. We work with partners like Babylon and Cell to provide Bitcoin economic security to different ecosystems and applications. Babylon excels at offering security on the consensus layer, and we extend this by partnering with LSD providers like Cell to bring Bitcoin’s security to various application layers. We recently announced a partnership with Babylon, and it has been months in the making. We’ve also been in discussions with P2P to join us as we launch our public testnet. Our aim is to establish a closed-loop ecosystem for BTC holders and stakers.

Hazel: Thank you so much for sharing. Now, BTCFi has enormous potential, but as some of you have mentioned, adoption has been slower than expected. Many individuals and institutions are accumulating and holding Bitcoin as a long-term store of value, yet relatively few are engaging in BTC-Fi activities to maximize capital efficiency. This trend highlights a critical gap between Bitcoin's current role and its untapped potential in DeFi. While holding BTC offers stability and a hedge against inflation, it lacks the yield-generating benefits that other assets in DeFi provide.

I’d love to hear your thoughts on the primary challenges for Bitcoin adoption and how each of your projects addresses them. Jing, do you want to start with this question? What do you think are the primary challenges for BTCFi adoption?

• Jing: I think that’s a very good question, and it’s not one with a single answer. When we look at what’s been happening with Bitcoin and Bitcoin DeFi, a lot has evolved over the last 9 to 18 months.

• In my view, the cycle has been compressed compared to other chains and tokens. The process of adoption, in my view, began with things like ordinals, where users could finally use Bitcoin for something beyond just holding it in their wallets. This was the initial step. Then, as teams started building Bitcoin layer tools, Bitcoin roll-ups, sidechains, and scaling solutions, we saw the next step in this evolution. Now, it’s about real use cases. It’s about delivering returns, understanding why users would bring BTC into this ecosystem, and finding ways to keep them engaged. I think all of us here are working to build a better user experience and to provide reasons for users and their Bitcoin to stay within this ecosystem.

• Secondly, when it comes to Bitcoin adoption, many people traditionally hold BTC in a few trusted places—on exchanges, in cold wallets, or within wrapped BTC on Ethereum, for instance. So, the user journey and the trust assumptions are very different from those of a traditional DeFi user. We’re focused on creating a general process that builds that trust, allowing users to feel comfortable with their journey.

• For some of these changes, it will take more time, but I wouldn’t necessarily say the pace has been slow. Ethereum took over five years to reach its current state, particularly in DeFi, where it all started. With BTC, we’re approaching things from a different direction. If anything, I think we’re making good progress.

Hazel: Got it, that’s really insightful. I’d love to hear your perspective, Lester. With P2P.org managing over $4 billion in assets, you have a unique view into the level of institutional interest in BTC staking. BTC-Fi offers a compelling opportunity for holders to unlock additional value through staking, lending, and other DeFi mechanisms. Yet, many institutions remain hesitant due to Bitcoin's traditional image as a conservative, low-risk asset, coupled with concerns around security, regulatory clarity, and the operational complexities of BTC-Fi. How is P2P.org preparing to meet the needs of institutional BTC holders? What specific challenges do institutions bring to BTC-Fi, and how are you addressing them?

• Lester: To be honest, at this very moment, we don’t see many institutional users moving in yet, which actually means the market has a lot of room to grow.

• There’s still significant potential for Bitcoin staking to expand. Currently, retail users are taking the lead, while institutional investors and VCs are still on the sidelines, trying to understand the landscape. They’re assessing the sustainability and safety of yield. The Western sentiment is more cautious, while Asian sentiment is moving faster. Mining pools are among the most receptive to BTCFi, as they seek ways to generate yield on BTC outside of lending it or using it as collateral. This is the current view, and we expect the adoption of Bitcoin staking to grow gradually as the ecosystem matures.

Hazel: Thank you, that’s very helpful. I know that BTC has traditionally been seen as a store of value, but BTCFi is starting to expand this role. I’m curious—what do you see as BTC’s utility beyond yield? Could this broaden BTCFi’s appeal?

• Clayton: The benefit of BTC compared to other crypto assets is its simplicity. As long as it’s viewed as a store of value by the majority of network participants, I think that’s enough. Adding additional complexities, especially at the base layer, could detract from this simplicity for a broader group of people who may not yet be actively involved in crypto. From an onboarding perspective, it’s easier to explain buying BTC and doing something straightforward with it, compared to pushing a more complex or exotic product from the beginning.

• So, to be honest, I think the base layer should remain simple. There should be a single, clear value proposition for holding BTC. Whatever additional applications people want to build on top of that can come later. We hope more advanced markets are built on our staking layer at Babylon, but ultimately, simplicity is our core value proposition.

Hazel: That’s a really interesting perspective—to keep the base layer simple while developing advanced application layers on top of it. Makoto, where do you see BTC’s utility expanding beyond yield?

• Makoto: I’d like to echo what Clayton said about simplicity. From a re-staking perspective, many crypto participants have experimented with staking other assets, such as Ethereum. However, there’s been a gap when it comes to completing the value chain, specifically around developer adoption. Developers who need network security are often stuck in the onboarding process for different crypto-economic security services.

• At Pell, we aim to simplify this process. We don’t want to overcomplicate integration for developers. Our system is also chain-agnostic, so any developer in any ecosystem can integrate their application with Pell’s technology. This approach will bring BTC utility from a native BTC context to a cross-chain level, where any ecosystem can leverage BTC security. We focus on providing utility first, allowing yields to follow naturally. This priority helps lower the barriers for developers needing security.

• Over time, I believe the utility of BTC as a security collateral will be widely accepted. BTCFi, from this security perspective, will eventually gain consensus as users recognize its value beyond simple holding.

Hazel: Great insights. Another key challenge in staking is the high fees associated with transactions, which can be a barrier to adoption. Could you share how your platforms are tackling this issue, especially as adoption scales? Clayton, I’m particularly interested in your thoughts on managing high fees.

• Clayton: No one can control the fees on the Bitcoin network; it’s entirely dependent on network demand at any given point in time. To be honest, for us, the prominent use case for BTC is as a store of value and ultimately to hold it securely. Personally, our goal is obviously to see transaction fees reduced from where they are currently, but our primary concern remains security. Right now, assuming that I, as a Bitcoin holder, plan to hold my BTC for five years, the reward rate attached to staking it on Babylon will provide me with X amount of additional Bitcoin over time. Does that initial staking fee present a barrier? Likely not, depending on the amount of Bitcoin. In that regard, I’m not overly concerned about fees on the Bitcoin network, at least for Babylon. Ultimately, Babylon operates as a Cosmos chain, so we expect fees to remain relatively cheap compared to Ethereum for the foreseeable future.

• Jing: I think it’s a very relevant question. Is there an immediate solution? I’d say no, given the current structure of Bitcoin's Layer 1 network. There are a number of scaling solutions currently in development, which we are actively involved in and discussing. But I believe these will take time. We only have one shot to get this right. What does that mean? It means we have one shot to establish a secure foundation, to get the gameplay right, and to build trust. In my view, from an early adoption standpoint, the primary focus should not be on transaction fees but on ensuring assets remain safe and staked correctly, both conceptually and technically. Many of us are focused on achieving simple scaling solutions that will naturally bring down costs, but we don’t have a ready-made solution to make this immediately feasible.

Hazel: Got it. Security is more important than transaction fees; it’s a trade-off we have to accept. BTCFi's success will likely depend on collaborations across different protocols. Clayton, you mentioned Babylon's positioning, and I’m curious, how do you envision the ideal BTCFi ecosystem? Are there any projects you think could add value to this ecosystem?

• Clayton: Yes, primarily, we’re looking at what we’re now calling Bitcoin-secured networks as the leading place for long-term Bitcoin-denominated DeFi. These are networks that have opted to integrate BTC security, creating a natural alignment and flywheel effect. We recently announced a partnership with Corn and also with Pella. Essentially, we're lining up these networks where people can stake their Bitcoin and then move into other ecosystems as we move forward. Bitcoin-secured networks benefit from accepting Bitcoin-denominated liquidity, leveraging the security Babylon provides.

• For example, in your DeFi ecosystem, you might want to have sBTC because you’re already paying these stakers for security, making it a more attractive asset than wBTC or other assets that don’t necessarily generate a reward rate for users or align with protocol incentives.

• Lester: For me, it's more straightforward. The BTCFi narrative resembles what we saw during DeFi summer with Ethereum. People were using ETH everywhere, paying gas fees, and the ecosystem revolved around it. I imagine BTC could achieve even more because of its unique positioning as a better store of value. Look at BTC's new all-time highs compared to ETH.

• I’m not saying ETH isn’t valuable—it absolutely is, and the ecosystem is robust. But BTC’s nature as a store of value, coupled with the vision of it as electronic cash, really makes it special. I work remotely, and in our global banking system, payments can take 10 to 20 days to clear, especially around bonus periods. While the traditional banking system is convenient in many ways, it’s also bogged down by regulations and interbank rules.

• If Bitcoin could actually serve as a yield-bearing payment method, expanding its use cases beyond just Web3, that would be groundbreaking. Of course, this is more of an ambitious goal, but we have great projects here on the podcast, and I hope we can all work together to make this dream a reality.

Hazel: Thank you. Clayton, you've emphasized Babylon’s primary focus on security, and I understand that Babylon supports self-custodial BTC staking, a critical factor for institutional holders wary of third-party risk. How do you design a protocol that maximizes user security and minimizes reliance on intermediaries?

• Clayton: The protocol itself is designed to be non-custodial. If you compare BTC staking on Babylon to ETH staking on Ethereum, there are differences. On Ethereum, your ETH actually leaves your wallet, and your wallet becomes a withdrawal address, effectively a claim on your ETH at a later date.

• With Babylon’s Bitcoin staking, because it operates on the Bitcoin network, you’re simply signing a UTXO transaction within your wallet, meaning the BTC doesn’t technically leave your wallet. It’s simply marked as an unspent transaction with specific parameters. Rewards are attached, but so are potential slashing conditions if you delegate to a finality provider that acts against the protocol’s interests. Our protocol is built to be non-custodial, allowing users to retain control.

• There are also ways to build additional use cases on top of Babylon. For example, a qualified custodian could handle the collateral off-chain, or an LST (Liquid Staking Token) issuer could manage it for users who prefer not to do it themselves.

• The core value proposition here is that Babylon offers multiple ways to participate, unlike other Bitcoin staking protocols that may not be non-custodial and may move BTC off the native network.

Hazel: Makoto, I have a specific question regarding Pell’s focus on the re-staking model. Could you explain how it differs from standard staking and what incentives it offers BTC holders? Also, how might Pell collaborate with other projects in this stack?

• Makoto: Sure. Let me walk through the workflow from a BTC holder's perspective. If you hold, say, one BTC, Babylon allows you to stake it directly from your wallet without relinquishing custody. However, many users might prefer depositing their BTC with Soft Protocol, which already collaborates with Babylon. BTC deposited with Soft is then staked via Soft on Babylon. Validators like P2P participate in validation to generate yield. The user receives a soft BTC token in return, which accrues Babylon’s yield.

• Pell enhances this setup by offering additional yield through our decentralized validation network, allowing BTC holders to earn an extra layer of rewards with minimal added risk. This 1+1 effect is ideal for users looking for low-risk returns. If users are staking in index pools or providing liquidity as an LP, they may face impermanent loss or smart contract risks. By keeping the staking process simple, we minimize exposure to these risks.

• Pell also offers an omnichain infrastructure, so users can stake their BTC LSTs on any chain without needing to wrap or bridge BTC repeatedly. This process minimizes risk while maximizing yield for BTC holders.

• I believe this approach will serve as the gateway for BTC holders, who are traditionally conservative, to explore DeFi. When Ethereum first introduced staking, adoption was slow due to security concerns. But now, Ethereum staking, liquid staking, and re-staking have all grown significantly. We have similar expectations, if not greater, for BTCFi.

Hazel: Thanks for sharing. As we know, the bear market tests the resilience of an ecosystem. I'm curious, what measures have you implemented to ensure BTC-Fi remains attractive during challenging market conditions, Lester?

• Lester: We’re infrastructure providers, so naturally, we’ve been working closely with BTC-Fi projects. For instance, with a project like Resolve, which Jing can vouch for, we've put in a lot of effort to develop products tailored to different needs. For our institutional partners, like exchanges, they might have distinct needs and requirements. Mining pools, on the other hand, might have other preferences. So, we actively work on securing the network and doing what a validator should do, but we also go a step further. We aim to work on the product side, customizing solutions with various ecosystem partners and extensive networks. That’s a big part of what we're trying to accomplish.

• Of course, there’s only so much we can do. We still rely heavily on protocol-level efforts, such as spreading the word and getting retail users interested in the BTC-Fi ecosystem. Our primary duty is to ensure the network’s security, which I believe is the most critical aspect of our job.

Hazel: You all mentioned retail users and BTC holders. Many BTC holders are more conservative, especially with Bitcoin’s value proposition as a store of value. How do you convince them to stake their BTC, especially when returns aren’t the primary focus right now?

• Lester: Absolutely, and I think this is a message we're helping Babylon communicate as well. Many traditional BTC custodians don’t currently allow staking on Babylon—not because they don’t support Babylon, but because it often takes a long time for custodians to adapt. They need to see actual demand, yield, and returns, and do the math before supporting staking for a new network. That’s just how it works.

• We’re also working with custodians like Resolve. We’re discussing ways to make it easier for them to allow BTC staking, like creating a clear revenue stream. Adoption takes time, especially with traditional institutional BTC holders. Often, it’s not that they don’t want to stake—it’s just that staking can be a hassle for them.

• For example, during the last staking cap, which happened at 3:00 am, we had an institution representative who flew in with private keys on his Ledger device. He had his Ledger, but couldn't complete the staking on Ledger’s background because withdrawals weren’t open yet. He didn’t want to stake directly, so we advised him to set up a Cobo account, which took some time. Unfortunately, he was in a remote area without a MacBook or iPad to set up Cobo, but he managed to stake eventually by sending it to a project founder. That’s just one example of the challenges we face.

• We’re actively working with Babylon and other protocols to smooth out these processes, helping custodians and traditional institutions integrate and open up more doors for institutional finance.

Hazel: Thanks for those insights. For BTC-Fi to truly gain traction, protocols must focus on building trust through secure, transparent, and non-custodial solutions that align with Bitcoin’s self-sovereignty ethos. Simplifying the user experience is also essential to make BTC-Fi more accessible. By effectively balancing security with yield potential, BTC-Fi has the chance to transform Bitcoin from a passive store of value to an active, yield-generating asset, appealing to both retail investors and institutions looking for enhanced capital efficiency without compromising Bitcoin’s core principles.

I understand that institutional adoption is a gradual process. I’d love to hear more about the growth roadmap for each of your projects. Let’s start with Babylon.

• Clayton: Our focus, as Lester mentioned, is that a lot of custodians and wallets are hesitant to enable certain transaction types on Bitcoin.

• And for good reason. There hasn’t been much to do on the native Bitcoin network historically. If you’re a custodian or wallet provider, losing someone’s Bitcoin would be the worst possible outcome for your business.

• So, this quarter and moving into Q1, our work is to establish Babylon as a very secure staking solution, making sure integration partners and their customers see us that way, and embedding staking functionality wherever BTC is held.

• We’re working with partners like Ledger, Fireblocks, Anchorage, and other custodians, primarily in the West. We’re also working with early adopters like Cobo, Fortify, and Texos, who have been instrumental in pushing things forward for us. For Cap 3, we’ll open up additional staking opportunities, which should help. We’re also considering a longer Cap timeline so that it’s not limited to a small window or an inconvenient time, like 3:00 am in some regions, making the process more accessible and leveling the playing field for Cap 3 compared to Cap 2.

Jing: Sorry, Clayton, has the timeline for Cap 3 been finalized, or is it still a work in progress?

• Clayton: It's a work in progress, but it's coming soon.

Hazel: Jing, what does the roadmap look like for you at Solv?

• Jing: I think the roadmap for us, and for many in this panel, is quite similar. At the end of the day, Bitcoin's adoption and usage are still relatively small within the entire ecosystem. Together, we’re all working to expand that pie.

• Our goal is to increase adoption, engagement, and scalability across the entire space. Specifically, we’re focused on two main objectives. First, how do we attract new users—especially newcomers to this ecosystem? Bitcoin's recent all-time high definitely helps, but long-term education, building trust with investors, and securing partnerships are all key elements.

• The second focus is ensuring that, once users are in the ecosystem, there are practical applications and solutions they can leverage. It’s about making scalability and diverse solutions easily accessible for them. So, in terms of our roadmap, these are the two main areas we’re focusing on right now.

Hazel: For a new BTC holder interested in staking, where should they start? What advice would you give on evaluating BTC-Fi opportunities?

• Jing: Evaluating opportunities in Bitcoin, or any crypto, is really no different from evaluating traditional portfolio investments. It’s about understanding your risk profile, risk tolerance, expected returns, and the amount of capital you're willing to commit.

• For staking, particularly in Bitcoin, it’s almost like evaluating an insurance or fixed-income product. So, first, assess your risk tolerance and profile. Second, I always advise partners and users to focus on operational security—how well you manage your teams and processes. On the downside, it's not just about technology or protocol issues but also about individual processes. It’s crucial to refine and secure every step.

Hazel: For yield generation in BTC staking, where do you see the balance between token rewards, network security, and the risk of over-inflating token supply? I’ll direct this to Makoto.

• Makoto: I’d like to echo some of the points mentioned earlier and share our perspective. Institutional take-up rates in BTC-Fi are just starting. If you look at Bitcoin itself as an asset, institutional players were some of the last to enter the space.

• Our focus is on starting with early adopters—the retail community. These users tend to embrace new technologies and are more willing to experiment. We currently have over 400,000 stakers on our platform, and we aim to keep growing that number. Only with strong community engagement will institutional players start to pay more attention and take the space seriously.

• If you look at Bitcoin’s history, it’s been around for over 15 years, but it was only this year that the BTC ETF was approved, opening the door to institutional participation. We expect a similar roadmap for BTC-Fi, where institutions will watch from the sidelines initially or invest small percentages of their portfolios to test the waters.

• As we strengthen the ecosystem, more institutional interest will come. In the past, the primary way to generate returns on BTC was through mining, but with recent halvings, Bitcoin mining has become more institutionalized, competitive, and less profitable. Many institutions hold BTC reserves that are currently underutilized, and we believe this will motivate them to explore new options for generating returns.

• As Jing, Clayton, and Lester mentioned, we’re all working toward a shared goal of growing the BTC-Fi ecosystem. Our strategy is to focus on retail adoption first. With patience and consistent building, we’re confident that institutions will follow over time.

Hazel: Timeline-wise, when do you think it will be suitable for institutional users to start adopting BTC-Fi?

• Makoto: If we look at the development of the Ethereum ecosystem as a reference, institutional adoption of DeFi also took several years. The advantage we have with Bitcoin is that there are already pioneers paving the way. I don’t expect it will take years before institutions begin to adopt BTC-Fi, but it won’t happen in a matter of days either. Lester probably knows this well.

• From P2P’s perspective, a lot of infrastructure, integration, and development work is needed, along with thorough security audits, to ensure the flow is robust. We're building additional components to support and extend the native Bitcoin network.

• I think this will take a few more months. I’m optimistic that we’ll see significant progress within the next 12 months. Another key point to highlight is the role of custodian players. Many of them act as intermediaries for institutions that hold Bitcoin assets. Soft, Babylon, and Pell, for instance, are directly working with these custodians. Over half of the custodian players we’ve spoken with are open to either participating in BTC-Fi or co-developing solutions that meet their customers' needs while integrating BTC-Fi protocols. I may be biased, but I’m very bullish on the future of BTC-Fi over the next 12 months.

Hazel: You all mentioned Ethereum as a reference. I’d like to hear your thoughts on how BTC-Fi stands out among other ecosystems, like Ethereum or Solana. What unique value does BTC-Fi offer? Maybe Clayton, you could start.

• Clayton: The answer is fairly straightforward. Bitcoin is the oldest and most distributed asset and network in the crypto space. Its widely accepted value proposition is as a store of value. When comparing Bitcoin to Ethereum or Solana, the first thing people think of with Bitcoin is its role as a store of value, not as an asset to pay network fees.

• For Ethereum, for instance, the primary use is for transaction fees on the network before we even discuss its “moneyness.” That simplicity and clarity of purpose make Bitcoin unique.

• From an institutional adoption perspective, the Bitcoin ETF is also significant. I believe that by the end of the year, around 5% of all circulating BTC will be held by ETF issuers. This differs from Ethereum and Solana, which don’t have as much institutional adoption in this form yet. That could change in 2025 or 2026, but for now, Bitcoin is well ahead in terms of both narrative and institutional involvement.

• Lester: For us at P2P, while we’re on the infrastructure side, we want to be at the forefront of BTC-Fi. To do this, we need strong partnerships with ecosystem players like Pell and Babylon. We’re eager to collaborate, share resources, and work together toward a common goal.

• Our main hurdle is accessibility. Many clients have limited access to BTC-Fi through traditional means, and their usual methods of interacting with blockchain don’t allow easy integration with Babylon or other BTC-based ecosystems. Our first step is helping these partners gain access and broaden adoption.

• The broader adoption and consistent use of BTC-Fi is something we’ll leave to the experts in this call, but we’re committed to doing our part by sharing resources and promoting interest. That’s our stance.

Hazel: Jing and Makoto, what are your thoughts on Bitcoin’s value proposition compared to Ethereum and Solana, which are also gaining traction?

• Jing: Right. The key difference is use case. For Bitcoin, Ethereum, or Solana, it’s about finding ways to use these assets within financial products or infrastructures. Bitcoin, however, stands apart because it’s widely recognized outside the crypto space as the face of the industry.

• I'm not saying other assets aren’t relevant, but from an outsider’s perspective, Bitcoin is the entry point and the most recognizable symbol of the industry. It has an inherent ability to attract users, which is a huge advantage.

• Makoto: We've been asked this question many times. There are a few key differences that make BTC-Fi unique. First, Bitcoin was the first cryptocurrency and has the broadest recognition and value. It’s also likely the most decentralized network. This foundational strength supports BTC as the premier crypto asset.

• However, historically, the Bitcoin network didn’t support advanced utility like Ethereum or Solana. They were built with more functionalities out of the box. To bring BTC-Fi to the next level, we’re bridging that gap by building infrastructure to support higher-level applications.

• The technical challenges have been the biggest barrier to expanding Bitcoin’s utility. But we’re addressing those now. For reference, Ethereum has the largest DeFi ecosystem with over $80 billion in total value locked, which represents about 20% of its market cap. Even if BTC-Fi achieved a similar adoption level, with Bitcoin’s market cap well over $300 billion, it’s a huge market that can’t be ignored.

• From Pell’s perspective, we want to extend Bitcoin’s inherent network security to the entire crypto space. If BTC becomes the underlying collateral, projects can shift focus to user-facing functionality and core services without having to build their own security infrastructure. This shift could bring a new phase of innovation and utility to Bitcoin.

Hazel: Thank you so much for sharing. It’s inspiring to hear about your work in expanding BTC-Fi. BTC-Fi is still a relatively new space, and it’s exciting to see each of you contributing to its growth. Ultimately, broader BTC-Fi adoption could position Bitcoin as not only a store of value but also a foundational asset for DeFi ecosystems, reshaping its utility and influence in the crypto landscape. Thank you again, Jing, Clayton, Makoto, and Lester.