Binance Labs shifts investment focus to Bitcoin DeFi

BTCFi protocols are gaining traction ahead of the anticipated Bitcoin halving event on April 19. Can they match Ethereum-native DeFi in the future?

Binance Labs, the venture capital (VC) arm of the world’s largest cryptocurrency exchange, has announced an investment in Bitcoin-native restaking protocol BounceBit.

BounceBit merges centralized finance (CeFi) and decentralized finance (DeFi) features in an effort to create more utility for Bitcoin (BTC), wrote Yi He, co-founder of Binance and head of Binance Labs, in an April 11 announcement:

“BounceBit unlocks new avenues for Bitcoin’s utilization with the fusion of CeFi and DeFi. At Binance Labs, we are always seeking innovators shaping the industry, and we look forward to watching their growth as they achieve their mission to empower Bitcoin through secure and transparent CeDeFi solutions.”

BounceBit is among a new wave of protocols aiming to bring DeFi capabilities to Bitcoin, in a new technological paradigm known as Bitcoin DeFi (BTCFi).

BounceBit aims to expand Bitcoin’s use case from being a store of value to becoming a yield-generating asset with more capital efficiency.

The proof-of-stake (PoS) layer-1 ecosystem incentivizes validators to stake both Bitcoin and BounceBit ecosystem tokens as part of its dual-token economy.

The Bitcoin-native restaking infrastructure aims to create more utility for Bitcoin, according to Jack Lu, the founder and CEO of Bouncebit:

“It is our mission to build restaking infrastructure to drive the utilization of Bitcoin and we want to do it in a secure and transparent manner. Our focus on CeDeFi and developing a robust restaking ecosystem is just the beginning. We are grateful to have Binance Labs support us in this endeavor”

Binance Labs became an independent venture capital arm after cutting ties with Binance exchange in March, when its portfolio was worth over $10 billion. It covered over 250 projects from over 25 countries with a return on investment rate of over 14 times.

BounceBit is currently offering its services to over 110,000 users, with over $782 million in total value locked (TVL), according to its homepage.

Related: With 10 days to the halving, analysts predict $150K Bitcoin top

BTCFi on the rise ahead of the Bitcoin halving

While Bitcoin-native DeFi was considered impossible a few years ago, BTCFi protocols are gaining traction ahead of the much-anticipated Bitcoin halving, set to take place on April 19.

Showcasing the demand for BTCFi, decentralized exchange (DEX) MerlinSwap raised 6,599 Bitcoin worth $480 million during its initial DEX offering (IDO) from over 52,000 investors on April 5.

The record IDO was a testament to the market’s demand for BTCFi which could match Ethereum in DeFi innovation in the future. Nash Lee, co-founder of MerlinSwap, told Cointelegraph:

“It symbolizes the community’s eagerness to engage with and drive forward the DeFi revolution on Bitcoin’s platform. It underscores a significant shift toward recognizing the untapped potential of Bitcoin in the DeFi space, highlighting a broad-based demand for innovative, decentralized financial solutions built on the world’s first cryptocurrency.”

Related: Bitcoin surpasses 65 million Ordinals inscriptions days before halving