Core (CORE)

Bitcoin Scaling

Key Metrics

• Circ. Market Cap: $843m

• Fully Diluted (FDV): $1.9bn

• CORE Token ADTV (30day): $50m

• Bridged TVL: $329m

• DeFi TVL:$305m

• Txns per Day (30day): 281k

• Unique Accts per Day (30day): 101k

• Circ. Supply Staked: 17%

• Staking Yield: 8.9%

• Token Inflation: 3.3%

Please refer to the bottom of this page for important disclosure information.

estimated reading time: 30–40 minutes

Key Points

Preserving Bitcoin’s Strengths

Core is a Bitcoin sidechain that addresses Bitcoin’s scaling constraints and long-term security budget. Unlike most Bitcoin scaling protocols, Core doesn’t require trust assumptions for BTC stakers or additional node infrastructure for miners. This helps preserve Bitcoin’s decentralization and non-custodial strengths, while offering additional fee revenue to Bitcoin miners and HODLers. As advancements like BitVM improve BTC bridging security, Core aligns with Bitcoin by helping miners retain more revenue as transaction activity moves off the L1.

Inheriting Bitcoin’s Security

Core is an EVM compatible sidechain that can process over 700 transactions per second. Core utilizes a unique consensus mechanism that attracts economic security from Bitcoin miners, BTC stakers and CORE stakers. Unlike merge mining, Bitcoin miners dedicate hashpower to Core validators without running specialized nodes. Additionally, BTC staking on Core is entirely non-custodial and permissionless, implying a ~4% risk-free yield to BTC holders. Over 50% of Bitcoin’s hashpower is already delegated to Core validators, while 5.4k BTC ($324m) and 154m CORE ($143m) is simultaneously staked to Core’s economic security.

Unlocking the BTCfi Economy

Less than 1% of BTC is locked in DeFi smart contracts, compared to ~35% of ETH used in DeFi or accruing staking rewards. As BTC holders seek utility beyond HODLing, Core’s has attracted over $320m of bridged BTC into its DeFi ecosystem. Core is also developing a liquid staking token (LSTBTC) that expands Bitcoin’s utility while accruing CORE staking rewards. With comparable risks and higher rewards than other wrapped BTC products, LSTBTC has potential to become a dominant asset within Bitcoin’s DeFi and restaking ecosystems.

Core’s Rapidly Growing Economy

Core is among the fastest growing blockchains, with bridged TVL growing from $5m to $330m since March 31st. EVM compatibility simplifies user and developer onboarding, helping Core quickly attract over 100 DApp developers and 101k daily active wallets. Core’s non-custodial BTC staking is also attracting institutional partnerships. Valour recently launched exchange traded products (ETPs) for staked BTC and staked CORE, while Copper recently integrated CORE and BTC staking into its institutional custody platform.

Underfollowed within Crypto’s Hottest Theme

While Bitcoin scaling is among the hottest themes in crypto, Core’s rapid emergence garners less coverage than other Bitcoin “L2” projects. However, Core is the only Bitcoin project offering risk-free yield to BTC holders and miners. This has attracted attention from major BTC holders, particularly institutional platforms seeking incremental yield. As Core’s ecosystem and economy continue to scale, the broader Web3 community should gain more appreciation for CORE’s unique traits.

CORE Scenario Analysis

TL;DR

• Protocol Background

  • CORE is the gas token and governance token of the Core blockchain.

  • Core is a Bitcoin sidechain that leverages Bitcoin’s security.

• Scaling Bitcoin

  • Bitcoin remains the most secure and valuable blockchain.

  • Core addresses Bitcoin’s scaling and security budget limitations.

• Satoshi Plus Consensus

  • Core uses a novel consensus mechanism called Satoshi Plus Consensus.

  • BTC miners, BTC stakers and CORE stakers delegate votes to Core validators.

• Unlocking Bitcoin Collateral

  • Trust assumptions historically limited BTC’s utilization within DeFi.

  • BTC holders have bridged over 5,500 BTC ($320m) to Core.

• Core Ecosystem

  • Core has among the fastest growing ecosystems by TVL.

  • Core’s EVM compatibility eases developer and user onboarding.

• Development Roadmap

  • Core is finding new ways to expand the BTCfi economy.

  • BitVM and OP_CAT activation would further improve Core’s bridging security.

• Core Community

  • CORE’s ~$1bn airdrop helped spark a large community.

  • Institutional partnerships are accelerating Core adoption.

• Tokenomics

  • CORE is both a gas token and governance token.

  • CORE doesn’t have meaningful supply overhangs related to dilutive unlocks.

• An Overlooked Bitcoin “L2”

  • Bitcoin scaling is among the hottest themes in Web3.

  • Core is among the leading Bitcoin scaling projects by user adoption.

• Risk

  • Core faces intense competition from emerging Bitcoin scaling protocols.

  • New Bitcoin upgrades could erode Core’s unique advantages.

• Core Contributors

Project Background

• CORE is the gas token and governance token of the Core blockchain.

• Core is a Bitcoin sidechain that leverages Bitcoin’s security.

Core Overview

Core is an EVM-compatible Bitcoin sidechain. The sidechain leverages Bitcoin’s security through its novel consensus mechanism, Satoshi Plus Consensus. Core is secured by Bitcoin miners via Delegated Proof of Work (DPoW), as well as BTC stakers and CORE stakers via Delegated Proof of Stake (DPoS).

Core’s initial contributors founded the project in 2020. The CORE token began trading when the Core blockchain went live in January 2023. Prior to CORE’s launch, Core did not have any VC investment or private token sales. Rather, CORE was issued via a fair launch that airdropped 25% of CORE’s total supply to over 1 million members of the community.

Figure 1: Core – Total Value Bridged

Scaling Bitcoin

• Bitcoin remains the most secure and valuable blockchain.

• Core addresses Bitcoin’s scaling and security budget limitations.

King Bitcoin

Bitcoin’s leading security and decentralization come with the sacrifice of scalability. Unlike many Layer-1 (L1) blockchains, Bitcoin does not support smart contracts or decentralized apps. Validator rewards also accrue to miners instead of stakers, meaning BTC holders don’t earn native yield.

Bitcoin’s leading security and decentralization make it well suited for holding large values of wealth. In fact, ~60% of all Bitcoin’s total supply is held by accounts with over 100 BTC ($6.0M). As such, any compromises to Bitcoin’s leading security and decentralization would likely reduce much of the value proposition of owning BTC.

Figure 2: BTC Supply by Address Balance

Bitcoin’s BTCfi Renaissance

Since the launch of Ordinals in January 2023, a new wave of Bitcoin development activity has emerged. Initially Bitcoin users created NFT-like tokens by inscribing image data. Quickly after, users created new fungible tokens (labeled BRC-20 and Runes) on Bitcoin’s blockchain.

Figure 3: Bitcoin – Daily Ordinals Inscriptions

For the first time in years, Bitcoin is attracting a wider developer community as Ordinals demonstrates significant demand for building more applications on Bitcoin. This includes new marketplaces and wallets dedicated to Bitcoin NFTs and memecoins. However, Bitcoin’s constraints still limit users from trustlessly using these assets in DeFi.

Figure 4: NFT Sales by Blockchain over Last 30 Days ($m)

Bitcoin’s Limitations

There’s significantly more value on Bitcoin’s blockchain than any other Layer-1 (L1). Not only does BTC’s market cap represent ~50% of all digital assets, but Bitcoin now hosts some of the most valuable NFTs and memecoins. However, Bitcoin assets largely remain idle, as users cannot trustlessly use BTC or Ordinals within DeFi applications.

Bitcoin’s long-term security budget also remains unsolved. While BTC is well suited for HODLing, the blockchain’s limited scalability constrains transaction fees. Bitcoin’s security budget still relies on inflation subsidies; however, in wake of the Halving, many BTC miners are dropping off the network and/or pivoting to AI.

Unless BTC’s price can compound at historical rates, Bitcoin miners will need additional sources of income to sustainably commit hashpower. Inscriptions and Runes help manage this gap; however, fees from Inscriptions remain too volatile for miners to rely on exclusively.

Figure 5: Bitcoin Mining Revenue

Core’s Value Proposition

Core is a Bitcoin scaling solution that expands Bitcoin’s utility while improving the sustainability of Bitcoin mining. Specifically, Core brings several benefits to the Bitcoin Ecosystem:

• Supplements miners’ income without sacrificing Bitcoin’s decentralization.

• Offers yield to BTC holders without introducing trust assumptions.

• Scales Bitcoin by offering faster/cheaper transactions and smart contract capabilities.

• Unlocks idle Bitcoin assets for DeFi while requiring limited trust assumptions.

Most Bitcoin scaling solutions rely on permissioned intermediaries; however, this limits interest from conservative BTC holders who value Bitcoin’s self-custodial traits. While scaling solutions like Liquid Network and Rootstock have been around for years, inherent trust assumptions have limited their wider adoption.

The Core blockchain uses a unique consensus mechanism that allows miners and BTC holders to secure the sidechain without running any additional node infrastructure or giving up custody. Core also supplements Bitcoin’s security budget by passing transaction fees to miners, unlike scaling solutions like Lightning Network.

Tech Ready Today, No Fork Needs

Dozens of Bitcoin scaling projects have formed since BitVM’s whitepaper was released in October 2023. While emerging projects like BitVM and Babylon offer bridging and yield opportunities to BTC holders, these protocols are still in development and maintain some degree of trust assumptions.

Core is the only active Bitcoin scaling solution that offers entirely trustless and non-custodial BTC staking, unlike Babylon which relies on permissioned “Finality Providers”. While most Bitcoin scaling solutions need Bitcoin upgrades such as OP_CAT to become entirely permissionless, Core is live and 100% permissionless today.

Figure 6: History of Bitcoin Upgrades

Satoshi Plus Consensus

• Core uses a novel consensus mechanism called Satoshi Plus Consensus.

• BTC miners, BTC stakers and CORE stakers delegate votes to Core validators.

Satoshi Plus Whitepaper

A deeper overview of Satoshi Plus can be found in the whitepaper here.

Satoshi Plus Consensus

The Core blockchain is secured by a consensus mechanism that:

• Supplements miners’ income without sacrificing Bitcoin’s decentralization.

• Offers yield to BTC holders without introducing trust assumptions.

• Scales Bitcoin by offering faster/cheaper transactions and smart contract capabilities.

Core derives much of its security from the Bitcoin network. Specifically, the Core blockchain is collectively secured by Bitcoin miners, BTC stakers and CORE stakers. This helps bootstrap Core’s security by leveraging the most secure and valuable blockchain. Meanwhile, Core returns value to the Bitcoin network by passing CORE rewards to Bitcoin miners and BTC holders.

Figure 7: Satoshi Plus Consensus

Core Validators

Core is secured by a permissionless set of 23 validators. These 23 validators are selected by Delegated Proof of Work (DPoW) and Delegated Proof of Stake (DPoS). Bitcoin miners, BTC stakers and CORE stakers collectively vote on Core’s most reputable validators. These top-23 validators take turns proposing blocks to earn CORE token rewards.

Blocks on Core are validated every 3 seconds. During peak periods, Core has processed over 700 transactions per second. Core fosters scalability by using a lower number of validators with higher technology requirements than Bitcoin nodes. As technology costs decline over time, the network can steadily increase both validator count and hardware requirements to improve scalability and decentralization.

Figure 8: Validator Node Requirements

Delegated Proof of Work (DPoW)

Bitcoin miners can simultaneously secure Core without additional hardware or software requirements. Unlike Merge Mining used by protocols like Rootstock, Bitcoin miners can secure Core without additional node infrastructure. This makes it easier for miners to secure Core while preserving Bitcoin’s decentralization by limiting miners’ technology requirements.

Bitcoin miners secure Core by delegating votes to Core validators. Miners delegate votes by inscribing metadata into Bitcoin’s OP_RETURN field when mining blocks. Metadata includes the validator’s address and the miner’s own wallet address on the Core blockchain. This allows miners to repurpose mining hashpower to earn both BTC and CORE rewards without barring additional costs.

Bitcoin miners face low barriers when validating Bitcoin and Core simultaneously. Low barriers have helped Core quickly attract high levels of mining security. After launching DPoW in January 2023, over 50% of Bitcoin’s mining hashpower is already securing Core.

Figure 9: Mining Hashpower (EH/s)

Delegated Proof of Stake (DPoS)

BTC and CORE stakers can also delegate votes to Core validators. Staking is entirely non-custodial, including BTC staking which doesn’t require additional trust assumptions. Rather, delegators can earn additional yield without putting collateral at risk.

• BTC stakers delegate votes to Core validators by using absolute timelocks on Bitcoin’s L1. Absolute timelocks are a native Bitcoin function that involves locking BTC for a pre-determined span of time. During this period, BTC cannot be sold or moved, which ensures stakers remain committed to a specific validator.

  Similar to DPoW, BTC stakers must inscribe the wallet address of their preferred validator and their own wallet address on Core’s blockchain. This enables BTC stakers to earn CORE tokens without giving up custody of BTC. Non-custodial BTC staking currently yields a 3-4% APY that’s virtually risk-free.

Figure 10: Bitcoin Staking via Absolute Time Locks

• CORE staking occurs directly on the Core blockchain and offers CORE holders an opportunity to secure the sidechain and earn additional yield. Similar to DPoS on other blockchains, CORE stakers can delegate votes to a validator. Unlike typical DPoS blockchains, CORE stakers only represent a fraction of total voting power.

Relayers

Relayers are special participants that transmit validator votes from Bitcoin miners and non-custodial stakers. Relayers run nodes on both Bitcoin and Core blockchains while transmitting Bitcoin block headers to the Core. Becoming a relayer is permissionless and requires a refundable CORE token deposit.

Validator Election

Core validators must stake a minimum of 10,000 CORE tokens (~$9,000) to participate in consensus. BTC miners, BTC stakers and CORE stakers collectively delegate votes to validators, where voting power between each group is determined by Core DAO. Core’s governance ensures a healthy balance between delegator groups, where voting power can be adjusted to incentivize diversification.

Token holders have delegated 5,446 BTC ($324m) and 154m CORE ($143m) to Core validators. This is combined with the ~330 EH/s of hashpower delegated by Bitcoin miners. Core DAO periodically adjusts voting power between these groups, with 35% of voting power currently weighted to BTC stakers versus 17% to miners and 49% to CORE stakers.

Figure 11: Core Validator Delegation

The 23 validators with the highest voting scores earn the right to produce Core’s blocks. Validators are selected every epoch, i.e. every 200 blocks (~600 seconds). Delegators’ votes are counted over the previous epoch. This gives each validator an opportunity to produce 8 to 9 blocks.

Delegators choose their preferred validator based on trustworthiness, uptime and commission rates. Validators that were previously slashed or suspended from block production are less likely to attract delegators. Validators share rewards with delegators while taking a small commission. Commission rates are determined by each validator independently but are typically ~5%.

Block Production

Core’s 23 validators take turns producing blocks in a round robin format. This gives each validator an equal opportunity to produce blocks and earn rewards. Core’s round robin structure incentivized delegators to spread votes evenly rather than delegate votes to the largest validator. Alternatively, many DPoS and Proof of Authority blockchains often end up with static groups of validators because the largest stakers are difficult to out vote.

Figure 12: Core Validators – Top 5 of 23

Blocks on Core are produced every 3 seconds. The network has supported up to ~700 transactions per second during peak periods. Over time, Core governance will increase block sizes (via the gas limit) and the number of validators to improve throughput and decentralization. Governance is also considering higher validator staking requirements (currently 10,000 CORE minimum) to increase security.

In the past month, Core processed ~280,000 transactions per day with an average cost per transaction of 0.005 CORE ($0.005). Core has not increased its gas limit since launching in 2023; however, governance is currently considering a slight increase. In June 2024, Core DAO voted to expand the validator set from 21 to 31 by Q2:2025.

Figure 13: Core – Daily Transactions

Figure 14: Core – Avg. Cost per Transaction

Security Mechanisms

Satoshi Plus Consensus uses several mechanisms to disincentivize bad validator behavior. Core remains provably safe unless over 33% of validators act maliciously. To disincentivize bad behavior, Core’s ecosystem monitors and penalizes bad actors.

• Verifiers are permissionless actors that monitor the Core blockchain for misbehavior. Verifiers report malicious behavior by submitting evidence of wrongdoing. If allegations are confirmed, the malicious validator is penalized and the verifier receives slashing rewards.

• Slashing. Slashing can occur when a validator stops producing blocks or acts maliciously. If a validator misses 50 consecutive blocks, then it loses all accrued rewards from the latest epoch. If a validator misses 150 consecutive blocks, then 10% of their CORE token deposit is slashed. If a validator is caught double-signing, then 100% of their CORE token deposit is slashed.

• Jailing occurs when a validator is suspended from becoming a validator. If a validator misses 150 consecutive blocks, they are removed from consensus and banned from becoming a validator for 3 days. If a validator is caught double-signing, they are banned from block production indefinitely.

  When a validator is jailed, Core’s consensus operates with one less validator until the start of the next epoch. A new validator is subsequently elected alongside the next election process. By postponing validator replacements, rather than replacing them immediately, Core can sustain smoother block production to maintain stable throughput.

Unlocking Bitcoin Collateral

• Trust assumptions historically limited BTC’s utilization within DeFi.

• BTC holders have bridged over 5,500 BTC ($320m) to Core.

Collateralizing Bitcoin

BTC cannot trustlessly be used in DeFi or with most smart contracts, despite Bitcoin’s leading value and security among digital assets. This leaves a vast majority of BTC remaining idle in users’ wallets. Alternatively, 35% of ETH is locked in smart contracts of DApps, liquid staking protocols (LSTs) or native staking.

Figure 15: Percent of ETH Locked in Smart Contracts

With just ~100 Opcodes, Bitcoin Script does not support most smart contracts or covenants. Limited programmability restricts developers from building DeFi protocols directly on Bitcoin. It’s also not currently possible to trustlessly bridge BTC to other blockchains or Layer-2 (L2) networks.

Without trustless bridging to other blockchains, BTC holders must rely on trusted intermediaries when holding wrapped BTC on other chains.

• Custodial solutions like WBTC use centralized intermediaries like BitGo to custody BTC and mint wrapped versions on other chains. While wrapped BTC can be used within DeFi, the underlying BTC is controlled by trusted third parties that can misappropriate or lose assets.

• Federated Sidechains offer fewer trust assumptions than WBTC but still rely on permissioned intermediaries. Federated sidechains are separate blockchains that connect to Bitcoin using a managed bridge. These bridges are managed by multi-sigs controlled by whitelisted keyholders to custody the underlying BTC.

  Federated sidechains have existed for years, including Liquid Network’s L-BTC that launched in 2019. Federated bridges remain secure as long as a majority of whitelisted signers are honest (i.e. 5 of 7). However, federated sidechains also rely on just a handful of intermediaries which offers significantly weaker security guarantees than most blockchains.

WBTC and federated sidechains have been around for years; however, neither have gained meaningful adoption from BTC holders. With Bitcoin’s trustless and non-custodial value proposition, it’s proven difficult to convince conservative BTC holders to forgo these advantages for higher yielding alternatives.

Figure 16: Percent of BTC Held in Wrapped Products

Reducing Trust Assumptions

With the reemergence of Bitcoin’s developer renaissance, builders are finding new ways to improve trust assumptions for BTC bridging. While WBTC still dominates market share, emerging solutions like SolvBTC and tBTC are reducing risks related to underlying Bitcoin custody.

• SolvBTC is a wrapped BTC product similar to WBTC. SolvBTC improves transparency towards BTC holdings by conducting comprehensive reporting and regular audits.

• tBTC is secured by overcollateralized ETH to maintain a 1:1 BTC peg. tBTC uses a decentralized network of “signers” to custody underlying BTC. Each signer must stake ETH as collateral to disincentive BTC misappropriation.

• coreBTC was launched by Core to offer decentralized BTC bridging (more on next page).

• cbBTC was recently announced by Coinbase. Coinbase is already among the most trusted BTC custodians, offering custody for 9 of the 11 U.S. listed Bitcoin ETFs.

• BitVM is an emerging solution currently undergoing development. Once live, BitVM can radically improve trust assumptions for Bitcoin bridging (more details in sections below).

Unlocking the BTCfi economy

Emerging bridging solutions are helping unlock BTC as a collateralized asset. Core is a leading destination for Bitcoin DeFi, where users have bridged over 5,550 BTC ($320m) to Core. Core’s ecosystem is expanding Bitcoin’s utility by integrating BTC assets into DeFi and Core’s own consensus engine.

• DeFi. Most major DApps on Core have integrated BTC products. Users can trade BTC on DEXs or earn yield from Automated Market Maker (AMM) pools. BTC can also be used as collateral within DeFi lending pools or Perps trading protocols.

• Transaction Fees. Core also plans to integrate wrapped BTC products within Satoshi Plus Consensus. This would allow users to pay transaction fees with BTC. Core validators, stakers and miners would also accrue BTC rewards for securing the network. This would further align Core as a valuable complement to Bitcoin.

Figure 17: Wrapped BTC Tokens Bridged to Core (5,579 total)

coreBTC

In March 2024, Core launched its own decentralized bridging solution for Bitcoin. While coreBTC doesn’t eliminate trust assumptions entirely, it facilitates BTC bridging in a permissionless and decentralized manner. coreBTC also offers safety buffers that protect underlying BTC holders.

coreBTC uses permissionless intermediaries to sustain its 1:1 peg. This contrasts with Federated Sidechains and custodial solutions that rely on permissioned intermediaries to hold underlying BTC.

• Lockers are permissionless actors that custody BTC on Bitcoin while minting coreBTC on Core. To mint coreBTC, a user sends native BTC to a Lockers’ Bitcoin address. Once BTC is received, the Locker will mint coreBTC on Core on a 1:1 basis.

  Lockers must also stake CORE tokens as collateral when holding users’ underlying BTC. A Locker’s staked collateral must always be greater than the value of custodied BTC. This safety buffer disincentives Lockers from stealing or misappropriating coreBTC holders’ underlying BTC.

• Relayers monitor the Bitcoin blockchain for activity between Lockers and BTC holders. Upon detecting a Lockers’ receipt of native BTC, relayers submit proof on the Core blockchain to enable the minting of coreBTC.

• Liquidators ensure that Lockers remain fully collateralized and safely custody underlying BTC. If a Locker misappropriates assets or refuses to redeem BTC, a Liquidator can slash the Locker’s staked CORE collateral. Confiscated CORE tokens are reallocated to coreBTC holders to compensate them for the lost BTC.

  Liquidators also ensure that Lockers remain overcollateralized with CORE. If the value of staked CORE declines below target overcollateralization thresholds, the Liquidator will automatically redeem users’ coreBTC for CORE tokens to ensure the Lockers’ overcollateralization threshold is met.

• Guardians monitor Lockers’ activity for misbehavior, such as misappropriating native BTC or refusing to redeem coreBTC. If misbehavior is detected, the Guardian will report activity to ensure Lockers are slashed. To incentivize a permissionless network of Guardians, a portion of slashed CORE collateral is offered to Guardians who report and verify Lockers’ misbehavior.

Figure 18: coreBTC – Permissionless Network

Tradeoffs of coreBTC

Unlike custodial wrapped BTC or Federated Sidechains, coreBTC does not rely on permissioned intermediaries. Rather, anyone can become a coreBTC Locker, Relayer, Liquidator or Guardian. Additionally, coreBTC is entirely managed by permissionless smart contracts unlike many BTC bridging alternatives.

While coreBTC is more decentralized than Federated Sidechains and WBTC, it remains a custodial product. As such, coreBTC still requires trust assumptions with Lockers that hold underlying BTC. To reduce trust assumptions, coreBTC creates incentives for Lockers and other participants to act honestly.

coreBTC’s main risk is related to the value of CORE tokens. If CORE’s valuation abruptly declines faster than Liquidators can compensate coreBTC holders, then Lockers’ may misappropriate assets if no longer fully collateralized. To reduce this risk, Lockers must stake $1.50 of CORE for every $1 of coreBTC issued.

Core Ecosystem

• Core has among the fastest growing ecosystems by TVL.

• Core’s EVM compatibility eases developer and user onboarding.

Accelerating Adoption

Since launching in January 2023, Core has quickly become one of the largest blockchains by user and financial activity. With $305m in DeFi TVL, Core ranks #19 among all blockchains. A vast majority of Core’s TVL growth has occurred in 2024, making it among the fastest growing blockchains.

Figure 19: Core – DeFi TVL

Core’s EVM compatibility eases user and developer onboarding. DApp developers can repurpose EVM DApps and quickly redeploy code on Core. This contrasts with Bitcoin sidechains like Stacks that are not EVM compatible. Core’s EVM compatibility also simplifies wallet integrations, including MetaMask and other popular non-custodial Web3 wallets.

Figure 20: Bitcoin Scaling Protocols – DeFi TVL ($m)

Core Ignition

In March 2024, Core Foundation launched the Core Ignition incentive program. Core Ignition is a points-based program that uses CORE tokens to help incentivize both user and developer activity. By using points-based multipliers, Core Ignition incentivizes higher value activity like stablecoin and BTC bridging.

Since Core Ignition started, ~5m new wallet addresses have interacted with Core. The program also helps attract 3rd party DApp developers, with over 100 teams currently building on Core. Many of these projects will launch their own tokens in the coming months, offering an incremental wave of token incentives.

Figure 21: DApp Interactions on Core – Unique Active Wallet Addresses

stCORE Liquid Staking

In May 2024, Core launched stCORE, a liquid staking token (LST) tied to staked CORE. With 17% of CORE’s circulating supply staked to validators, stCORE unlocks a large base of liquidity for Core’s DeFi ecosystem. Similar to many other LSTs, stCORE is a rebasing token that increases in value as staking rewards accrue. TVL in stCORE is $9m, or 7% of total CORE staked.

DApp Ecosystem

Over 40 DApps have already launched on Core, according to DeFiLlama. These projects include spot DEXs, lending protocols, as well as Perps trading. Core’s largest DApp contributes 47% of DeFi TVL while the top-3 contribute 96%. Many protocols are native to Core, where 3 of the top 5 protocols exist on a single chain.

After most Core DApps launched in Q2:24, several more will launch in H2:24. Multiple bridging protocols have also integrated with Core, including the Core Bridge powered by LayerZero. Core Bridge is integrated with 6 different EVM chains: Ethereum, BNB Chain, Arbitrum, Avalanche, Optimism and Polygon.

Figure 22: Core – DeFi Diversity by TVL

Top Ecosystem DApps by TVL

• Colend, $121m TVL (40%). Colend is a borrow/lend protocol native to Core. The DApp was forked from Aave V3 by a group of 3rd party developers.

• Pell Network, $144m (47%). Pell is a restaking protocol for Bitcoin ecosystem projects. The DApp is live across 10 different chains.

• COREx, $27m TVL (9%). COREx is a Uniswap V3 fork that launched in June. COREx’s development roadmap includes social copy trading capabilities where users can mimic strategies of more experienced traders.

• Glyph Exchange, $6m TVL (2%). Glyph Exchange is the leading Spot DEX on Core. The protocol is geared towards trading Bitcoin inscriptions.

• NLX, $1m TVL (0.2%). NLX Protocol is a Perps DEX native to Core. NX Pool stakers can earn BTC yield by providing liquidity to isolated markets.

Figure 23: Core – Developer Ecosystem

Development Roadmap

• Core is finding new ways to expand the BTCfi economy.

• BitVM and OP_CAT activation would further improve Core’s bridging security.

Roadmap

Core’s roadmap includes upgrades to improve network efficiency and features that expand Bitcoin’s utility. Advancements like BitVM and OP_CAT would further reduce trust assumptions for BTC bridging; however, Core’s roadmap isn’t reliant on these external developments.

Core’s Roadmap:

• Dual Staking

• Bitcoin Liquid Staking

• BTC Gas Payments

• Local Fee Markets

• HTLC Swaps

• Expanded coreBTC Collateral

• BitVM & OP_CAT

Dual Staking

In July 2024, Core Foundation announced a dual staking model between BTC and CORE stakers. Users that stake both CORE and BTC simultaneously will earn boosted rewards on top of existing yields. This initiative further aligns incentives between the Bitcoin and Core ecosystems.

Dual staking incentivizes BTC stakers to also stake CORE. This can drive more demand for CORE as Bitcoin stakers seek higher yields. This played out with one of Core’s institutional partners, Valour. Alongside staking $75m BTC to Core validators, Valour subsequently purchased $200m of CORE.

Bitcoin Liquid Staking

Core’s roadmap includes a Bitcoin liquid staking token (LST). LSTBTC holders will continue to earn CORE staking rewards while using the token in DeFi or restaking protocols. LSTBTC’s underlying Bitcoin is staked non-custodially; however, a federated bridge will connect LSTBTC to EVM ecosystems.

Users are increasingly using wrapped BTC products for DeFi and restaking. While lending DApps have accepted WBTC and BTC.b for years, restaking protocols like Symbiotic and Karak are increasingly accepting various wrapped Bitcoin assets.

Figure 24: Restaking Protocols – TVL from Bitcoin Products ($m)

LSTBTC offers similar centralization risks as other federated Bitcoin bridges, and fewer centralization risks than custodial products like WBTC. Yet unlike peers, LSTBTC accrues CORE staking rewards. This makes LSTBTC an ideal form of collateral within DeFi and restaking ecosystems.

ETH LSTs are a dominant form of collateral within DeFi and restaking, despite greater centralization risks than WETH. Alternatively, LSTBTC offers comparable centralization risk as other wrapped Bitcoin products. With comparable risk and higher rewards, LSTBTC has potential to become an integral part of the growing BTCfi economy.

Bitcoin Gas Payments

Core’s Satoshi Plus Consensus currently uses CORE as the gas token for user transaction fees. Core builders are working to expand gas payments to coreBTC and other wrapped BTC products. Core validators and delegators could earn both CORE and BTC rewards, further aligning incentives between both chains.

Local Fee Markets

Blockchains like Solana increase transaction throughput by creating isolated fee markets for certain transaction types. Core is considering local fee markets for Bitcoin and stablecoins. This would increase throughput and reduce costs for Bitcoin and stablecoin transactions, thus improving Core’s utility as a payment channel.

HTLC Swaps

Core developers are building HTLC Swaps that allow users to easily swap native BTC for ERC-20 tokens on Core. HTLCs enable conditional BTC payments by requiring a receiver to confirm receipt by generating a cryptographic proof. These are used by protocols like Lightening Network, as well as for cross-chain atomic swaps.

Expanded coreBTC Collateral

coreBTC is integrating more forms of collateral such as stCORE. Prior to this, Lockers had to forgo earning CORE staking rewards. Developers are also expanding coreBTC’s collateral to include WETH, stablecoins and liquid staked ETH. Expanded collateral can reduce risk for coreBTC holders while also reducing the overcollateralization requirements for Lockers.

BitVM & OP_CAT

While neither BitVM nor OP_CAT are live today, both could improve trust assumptions for BTC bridging. Decentralized products like tBTC and coreBTC are secured by decentralized networks; however, pegs are vulnerable to price volatility. tBTC and coreBTC’s overcollateralization requirements also limit scalability.

BitVM enables a “trust minimized” bridge between Bitcoin and other blockchains. Similar to Ethereum’s optimistic rollups, BitVM supports “verifiers” that monitor the bridge. If a bridge operator tries to censor or maliciously steal bridged assets, verifiers can contest these illegitimate transactions. When a verifier wins a dispute, they can slash the malicious operator.

BitVM developers recently released a “BitVM2” whitepaper that includes permissionless verifiers. As long as a single honest verifier is monitoring the network, the BitVM bridge remains secure. This is a significant improvement over federated sidechains that require a majority of whitelisted validators to secure a bridge.

Figure 25: BitVM Bridge Configuration

Implementing BitVM can improve trust assumptions for both LSTBTC and wrapped Bitcoin products on Core. The activation of OP_CAT on Bitcoin could further improve trust assumptions by enabling trustless bridging between Bitcoin and Core. This would further increase Core’s security guarantees while offering a larger addressable market of BTC holders bridging into the Core ecosystem.

Core Community

• CORE’s ~$1bn airdrop helped spark a large community.

• Institutional partnerships are accelerating Core’s adoption.

Coretoshi Community

CORE’s airdrop was one of the largest in crypto history, with 525m tokens airdropped to 1.1m users. This helped attract a large base of “Coretoshis” into Core’s ecosystem.

• Daily Active Wallets (30D): 101k

• Total Unique Wallet Addresses: 20.7m

• Twitter: 2.2m followers (Link)

• Discord: 264k members (Link)

Figure 26: Core – Cumulative Unique Wallet Addresses

Core DAO Governance

Core DAO is managed by CORE holders that vote on key changes to protocol. Voting includes parameters behind Satoshi Plus Consensus, such as delegating power between stakers and miners. CORE stakers will eventually determine how to allocate Core DAO’s treasury which holds ~190m CORE tokens (~$167m).

Core DAO is transitioning to a fully on chain governance model. CORE stakers can already vote on key consensus variables; however, “Core Improvement Proposals” are still conducted off chain. Core’s community is working on a phased approach to move decision making on chain while limiting common DAO vulnerabilities.

Ecosystem Development Initiatives

Core Foundation is an organization committed to growing Core’s ecosystem. 10% of CORE’s total supply was allocated to help Core Foundation accelerate onboarding of builders and users. Another 10% of CORE’s supply was allocated to Core DAO’s treasury to also boost ecosystem development.

• Core Ignition Builders program is a 12-month program targeting DApp developers. Developers on Core can earn CORE tokens by achieving certain targets for TVL, users and transactions. The program uses CORE tokens as farming incentives to help DApps attract user activity.

• Core Venture Network (CVN). In April 2023, Core Foundation announced a $200m ecosystem investment fund in collaboration with MEXC and Bitget. The ecosystem fund targets early-stage projects building on Core. Other members of CVN include VCs like Foresight Ventures and Marin Digital Ventures.

• Core Starter Program is an initiative by Core Foundation to improve developer onboarding. The program offers discounts on developer tooling and services, such as Elixir and Google Cloud.

• BTCfi Summer Hackaton is a 12-week program that started in June. Developers can apply and submit projects to compete for a $250,000 prize pool.

• Grants Program. Core Foundation also offers a grant program for projects building on Core.

Institutional Partnerships

Core Foundation is collaborating with institutional partners to expand CORE’s accessibility. This simultaneously improves Core’s economic security.

• Valour ETPs. In April 2024, Core announced a partnership with Valour, an issuer of Exchange Traded Products (ETP) for digital assets. Valour is launching a CORE ETP and a “Yield Bearing” BTC ETP on European stock exchanges. Valour provides staking services, meaning ETP owners can earn CORE staking rewards.

  Additionally, Valour runs a Core validator to contribute to Satoshi Plus Consensus. Valour also purchased $200m of CORE tokens. Valour is also using BTC from its own balance sheet to stake 1,498 BTC ($90m) to Core validators.

• Copper. Copper is a leading institutional custodian for digital assets. In August 2024, Copper launched support for Core, offering institutional custody for CORE. Additionally, Copper offers CORE staking and non-custodial BTC staking for institutional clients.

• Mining Pools. Core is attracting Bitcoin mining pools to quickly grow its delegated hashpower. 5 mining pools are contributing to Satoshi Plus Consensus by delegating votes to Core validators. These mining pools have helped Core validators attract over 50% of Bitcoin’s hashpower within a relatively short period of time.

Tokenomics

• CORE is both a gas token and governance token.

• CORE has lower supply overhangs related to dilutive unlocks.

CORE Value Accrual

CORE is used to pay network transaction fees. Users spent ~33,500 CORE (~$35,000) on gas fees over the past 30 days. The network also uses token subsidies to help bootstrap security during initial years of adoption.

Figure 27: Core – Daily Network Transaction Fees

Transaction fees and token subsidies make up Core’s block rewards. Subsidies currently represent a vast majority of block rewards to accelerate participation in Satoshi Plus Consensus.

• Core Validators accrue 90% of block rewards while passing most rewards to delegators. Delegators include Bitcoin miners, BTC stakers and CORE stakers. Core DAO governance determines the rewards distribution between these delegator groups.

• System Rewards receive 10% of block rewards. These incentivize Relayers and Verifiers involved in Satoshi Plus Consensus. Relayers transmit data between Bitcoin and the Core blockchain, and Verifiers monitor the network for malicious activity.

• Burn Address. Core’s System Rewards contract is capped at 10 million CORE tokens. When token rewards exceed the 10m cap, any incremental CORE tokens are burned and removed from circulation.

Figure 28: Satoshi Plus Consensus – Block Reward Distribution

Token Supply

CORE launched with a total token supply of 2.1 billion. 43% of CORE’s supply is unlocked and in circulation. Of its circulating supply, 17% is currently staked to validators. Block subsidies represent a vast majority of locked CORE, which are paid out over 81 years.

Figure 29: CORE – Supply Distribution

Genesis Supply

CORE was not sold privately to investors prior to Core’s launch. This left a vast majority of tokens allocated to the community.

Figure 30: CORE – Genesis Supply Distribution (January 2023)

• Airdrops (Users). 25% of CORE’s supply was airdropped to users when Core launched in January 2023. 25% of the airdrop was unlocked at genesis, while the remaining vests monthly over 2 years.

• Validator Rewards (Node Mining). 40% of supply was allocated for block subsidies to Core validators. Block subsidies are distributed over ~81 years while declining 3.6% annually.

• Relayer Rewards. 0.5% of supply was allocated to subsidize relayer rewards. Similar to validator rewards, Core must also subsidize rewards to relayers until transaction fees are more meaningful.

• Core DAO (Treasury). 10% of tokens were allocated to ecosystem development and to support Core DAO. These tokens will eventually be controlled by Core DAO governance; however, treasury management is currently managed by Core’s developer team.

• Reserves. 10% of CORE’s supply was allocated for strategic investments to grow the Core ecosystem, including incentive programs like Core Ignition.

• Key Contributors. 15% of supply was allocated to key contributors and builders of Core. These tokens vest over a 4-year period with a 2-year lockup.

Supply Inflation

With 43% of CORE’ supply in circulation, CORE is not subject to meaningful supply overhangs related to dilutive unlocks. This contrasts with many recent low float, high FDVs projects backed by VCs.

• Block subsidies are released to Chain validators over a ~81-year period while steadily declining over time. Validators currently receive ~83,000 CORE subsidies per day, while ~10% of transaction fees are burned. Together this implies a ~3% inflation rate on CORE’s circulating supply. Block subsidies decline by 3.6% annually to reduce inflation impacts.

• Airdrop Unlock. When 525.6m CORE tokens were airdropped to users, 25% of the airdrop was unlocked on day 1. The remaining 75% vests monthly over 2 years. This implies 84% of CORE’s airdrop is already in circulation. The remaining 82m tokens will unlock over the next 5 months (9% of circulating supply).

• Core Contributors. 315m CORE tokens were allocated to Core’s key contributors. These tokens vest monthly over a 4-year period with a 2-year lockup (occurs January 2025). These unlocks will release 7m tokens per month until January 2029. This implies 0.7% growth in CORE’s circulation supply each month starting next year.

Figure 31: CORE – Supply Schedule

CORE Staking Yield

CORE holders are currently earning a ~9% staking APY, depending on which validator they delegated to. This implies a real yield of ~6% when factoring ~3% inflation related to validator subsidies.

An Overlooked Bitcoin “L2”

• Bitcoin scaling is among the hottest themes in Web3.

• Core is among the leading Bitcoin scaling projects by user adoption.

Overlooked Among Bitcoin Scaling Protocols

Bitcoin scaling is among the hottest themes in Web3, where Bitcoin “L2” ventures raised $129m in VC funding in H1:24 (according to Galaxy Research). Core’s trust assumptions are among the lowest relative to peers, while user adoption is among the highest.

That said, CORE remains underfollowed relative to peers like Stacks (STX) and emerging projects like Bitlayer, Babylon and BOB. As TVL continues to scale and Core validators attract more Bitcoin miners and stakers, we expect CORE to capture greater attention from the broader Web3 community.

Comparing CORE to STX

Stacks (STX) is among the most successful Bitcoin scaling protocols, having launched in 2021. Similar to Core, Stacks is a Bitcoin sidechain that leverages Bitcoin for economic security. However, unlike Core, Stacks is not EVM-compatible. This has slowed Stack’s adoption relative to Core and other Bitcoin scaling projects.

STX trades at a premium valuation relative to CORE, despite Core’s higher TVL. Core also offers higher transaction throughput than Stacks, both before and after Stacks’ Nakamoto upgrade. Core’s EVM compatibility has also helped attract more users and builders to the ecosystem.

Figure 32: Comparing Bitcoin Sidechains

If CORE and STX traded at comparable price to TVL ratios, this would imply CORE trading at $6.70 per coin vs $0.88 today. Meanwhile Core’s growth trajectory has exceeded Stack’s, where Core’s TVL has steadily grown throughout 2024. Alternatively, Stacks’ TVL largely peaked in Q1:24 when measured in both U.S. Dollar terms and STX prices.

Figure 33: Total Value Locked (TVL) in DeFi Protocols

Long-term Value Potential

Bitcoin’s leading decentralization and security offer an ideal settlement layer. As emerging solutions like BitVM improve bridging security, Bitcoin could compete with Ethereum as a base layer for more scalable blockchains. This could push CORE’s valuation above many leading Ethereum L2s.

We outline a scenario where Bitcoin scaling protocols achieve similar penetration as Ethereum L2s. Ethereum L2s attracted have ~$30bn in bridged TVL since launching less than 4 years ago (TVL excludes L2 governance tokens). This represents 5% of all ERC-20 assets on Ethereum (including ETH). If Bitcoin “L2s” achieve similar penetration within 3-4 years, this would imply ~$60bn of bridged TVL.

Figure 34: Market Cap of Native Assets on Ethereum

Meanwhile, Ethereum L2 governance tokens trade at a combined ~$30bn FDV. This implies a ~1:1 ratio between L2 FDVs and bridged TVL. If Bitcoin scaling protocols achieve comparable FDV to TVL ratios, this would imply a ~$60bn FDV opportunity for all Bitcoin scaling protocols within 3-4 years.

Of the 60+ Bitcoin scaling protocols being developed, only CORE, STX and MERL have tradable tokens. These protocols trade at a $5.3bn combined FDV, or 0.4% of BTC’s market cap. As emerging protocols like Citrea, Bitlayer and BOB launch tokens in the coming years, we expect the aggregate FDV for Bitcoin scaling projects to grow.

Figure 35: Aggregate FDV Penetration of L1 Market Cap

Our scenario analysis assumes CORE maintains a ~20% FDV share of all Bitcoin scaling protocols. This is comparable to Core’s current 25% DeFi TVL share across all Bitcoin scaling projects (a proxy for bridged TVL). Any upside in BTC prices would imply upside to our analysis.

Figure 36: CORE Scenario Analysis

While new competition may fragment Core’s market share, airdrop farmers are also temporarily boosting TVL for competing projects. Ethereum L2 trends also demonstrate that TVL often gravitates to early movers, where Arbitrum and Optimism maintain 56% TVL share among all Ethereum L2s.

Risks to CORE

• Core faces intense competition from emerging Bitcoin scaling protocols.

• New Bitcoin upgrades could erode Core’s unique advantages.

We highlight key risks that may limit Core’s broader adoption, as well as risks related to protocol security. In a bear case scenario, we estimate CORE could trade as low as $0.23 which implies an FDV comparable to MERL.

• Bitcoin Scaling Competition. Emerging Bitcoin scaling ventures like Babylon, Botanix and Citrea aim to expand Bitcoin’s utility. While these projects don’t eliminate trust assumptions entirely, each offers unique design choices to reduce centralization risks. These emerging protocols may attract users and BTC stakers away from Core. Additionally, these projects may attract airdrop hunters which may also reduce Core’s user and TVL activity.

• Bitcoin Upgrades. Future Bitcoin upgrades could reduce Core’s unique advantages, such as non-custodial BTC staking. Potential Bitcoin soft forks could make it easier for developers to trustlessly stake BTC to other blockchains. Alternatively, soft forks could restrict miners and BTC stakers from delegating votes to Core validators, thus negatively impacting CORE. Other Bitcoin scaling projects may also better capitalize on new opportunities created by future soft forks.

• Bugs & Exploits. Core has received multiple security audits, including audits by Halborn and Least Authority. Since launching in 2023, no exploits or hacks have been recorded. That said, Core’s governance is still partially reliant on off-chain procedures. As Core DAO governance transitions entirely on-chain, there could be risks that governance is exploited, particularly if DAO voting participation remains low. Additionally, Core’s growth trajectory could be negatively impacted if one of Core’s leading DApps is hacked or exploited.

• CORE Volatility. CORE tokens contribute a meaningful share of Core’s economic security. Meanwhile, coreBTC’s security is reliant on overcollateralized CORE. Extreme volatility in CORE token prices could reduce Core’s security and have a cascading effect on CORE’s token price. Core manages this risk by attracting economic security from BTC miners and stakers. Core is also addressing coreBTC vulnerabilities by implementing additional forms of collateral.

• Bitcoin Risks. While Bitcoin is the most secure and decentralized blockchain, Core DAO has minimal impact on Bitcoin’s governance or security. Given that Core is highly reliant on Bitcoin, any adverse impacts to the Bitcoin ecosystem could offer contagion to CORE.

Core Contributors

Core’s development is led by Core Foundation, a centralized entity with over 65 contributors globally. Thousands of community members also contribute to Core’s development. Core’s initial contributors helped start the project in 2020. Many of Core’s initial contributions also support Core Foundation.

• Rich Rines was a lead engineer at Coinbase prior to helping launch Core. At Coinbase, he led its money transfer technology platform. Prior to Coinbase, Rich held several software engineering roles at Web2 tech companies. Rich is a serial entrepreneur and a Bitcoiner since 2013. He graduated from Boston College with degrees in Economics and Informance Systems.

• CJ Reim has held investment roles at multiple Silicon Valley VCs and growth equity firms. CJ serves as a board member at several tech firms based in the San Francisco Bay Area. He also graduated from Boston College, with degrees in Finance and Information Systems.

• Lindsey Haswell has held Chief Administrator and Chief Legal Officer roles at MoonPay, Blockchain.com and Lime. In addition to contributing to Core, she’s a member of the Board of Directors for BlackRock’s iShares Bitcoin Trust ($IBIT). Lindsey earned a J.D. in Law at NYU School of Law and a Juris Doctorate and USC Gould School of Law.

• Brendon Sedo is a serial entrepreneur, including co-founding a Silver Lake backed tech company that was acquired in 2019. Brandon graduated from the University of Manitoba with a degree in Entrepreneurship.

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