BTCfi, short for Bitcoin finance, is the catch-all label for protocols that put BTC to work earning yield, backing loans, or settling trades onchain. For most of crypto's history, Bitcoin sat idle. By 2026, that changed. Wrapped BTC variants on Ethereum and L2s, native Bitcoin L2s like Babylon and Stacks, and restaking primitives have pulled a meaningful slice of BTC into DeFi. This article maps the category: how the money is split between wrapped and native BTCfi, which protocols hold the most TVL, and where Circle's newly announced cirBTC fits into the picture.
​

BTCfi covers any onchain financial activity where Bitcoin is the underlying asset. That includes wrapped BTC used as collateral on Ethereum lending markets, native Bitcoin DeFi on L2s like Stacks, restaking BTC to secure other chains via Babylon, and yield strategies that route BTC across multiple chains. DeFiLlama tracks the category separately from general DeFi TVL.
​

Three forces converged. First, institutional spot BTC ETFs normalized Bitcoin as a treasury asset, and treasuries wanted yield on their holdings. Second, Babylon shipped Bitcoin-native restaking in 2024 and crossed meaningful TVL by mid-2025, giving holders a way to earn yield without bridging. Third, a wave of credible Bitcoin L2s, including BoB, Bitlayer, and Merlin, launched with EVM compatibility, making it easier for existing DeFi protocols to deploy.
​

Layered on top, new wrapped BTC issuers entered the market. Coinbase launched cbBTC in September 2024. Antalpha Prime and Mantle shipped FBTC. Circle announced cirBTC in 2026, targeting institutional flow. Wrapped BTC stopped being a single-issuer category and became competitive, which compressed risk premiums and pulled more BTC onchain.
​

By DeFiLlama's BTCfi category, total value secured sits in the tens of billions of USD as of May 2026, depending on how restaking is counted. The split is roughly: wrapped BTC on Ethereum and L2s holds the largest share, followed by Babylon restaking, with native Bitcoin DeFi on Stacks, BoB, and Bitlayer making up the rest. Exact figures shift daily. Pull current numbers from DeFiLlama before quoting.
​

Wrapped BTC variants are the single largest BTCfi bucket. They take native BTC into custody and mint a 1:1 ERC-20 representation on Ethereum or another EVM chain. That token can then be lent, borrowed, used as collateral, or LP'd. The major variants in 2026:

Native BTCfi means protocols where BTC stays closer to the Bitcoin base layer. Babylon pioneered Bitcoin-native staking by letting holders lock BTC to secure proof-of-stake chains and earn yield without wrapping. Stacks is the longest-running Bitcoin L2 and hosts Sovryn and Alex, the two largest native Bitcoin DeFi protocols. Newer EVM-compatible L2s anchored to Bitcoin, including BoB, Bitlayer, and Merlin, sit between native and wrapped: they use BTC as gas or collateral while running familiar Solidity contracts.
​

The table below ranks the eight largest BTCfi protocols by reported TVL as of May 2026. Verify against DeFiLlama before citing.

Aave and Morpho dominate wrapped BTC lending. Aave's BTC markets accept WBTC and cbBTC as collateral for borrowing USDC, USDT, and ETH. Morpho runs curated vaults that route BTC collateral through whitelisted lending markets with tighter risk parameters. Sky (formerly MakerDAO) accepts WBTC as collateral for minting USDS. When cirBTC ships, it will likely onboard to Aave, Morpho, and Sky given Circle's existing relationships with each.
​

Babylon's pitch is that BTC holders can earn yield without trusting a wrapped-token custodian. Holders lock BTC on Bitcoin via timelock scripts, and that locked BTC backs validators on proof-of-stake chains. Slashing is enforced cryptographically on Bitcoin. Liquid restaking protocols, including Lombard (LBTC), pxBTC, and uniBTC, then issue ERC-20 tokens representing staked BTC positions, which can be used in Ethereum DeFi. That stacks yield: base BTC plus restaking rewards plus DeFi yield.
​

Sovryn and Alex are the two longest-running native Bitcoin DeFi protocols. Sovryn operates on Rootstock and Stacks, offering BTC lending and a DEX. Alex runs on Stacks and focuses on a BTC-native DEX and yield products. Combined TVL is small relative to wrapped BTC on Ethereum, but the user profile differs: Bitcoin-maximalist holders who refuse to bridge to Ethereum.
​

cirBTC, announced by Circle in 2026, targets the institutional end of BTCfi. Circle's pitch is that OTC desks, market makers, lending protocols, and treasuries already trust Circle's USDC and EURC reserve model and want the same transparency for wrapped BTC. cirBTC will launch on Ethereum and Arc, Circle's L1, with 1:1 native BTC backing and onchain-verifiable reserves. Once live, it slots into the same lending and collateral surfaces as WBTC and cbBTC, with Circle's institutional distribution as the differentiator. Status as of May 2026: coming soon, subject to regulatory approvals, waitlist open at circle.com/cirbtc.
​

Three risks dominate. Custody risk for wrapped BTC: WBTC, cbBTC, FBTC, and cirBTC all depend on a custodian holding the underlying. tBTC mitigates this with threshold cryptography. Bridge risk for cross-chain BTCfi: moving wrapped BTC between chains introduces bridge attack surface. Slashing and protocol risk for restaking: Babylon's slashing conditions are still being battle-tested at scale.
​

Three trends to watch. First, more wrapped BTC issuers will enter, compressing fees and risk premiums. cirBTC is the most institutional entrant. Second, Babylon-style restaking will likely consolidate into a few liquid restaking tokens that dominate Ethereum integrations. Third, Bitcoin L2s will fight for the EVM-compatible BTCfi segment, with Bitlayer, BoB, and Merlin competing on bridge UX and DeFi depth.
​

TVL figures pulled from DeFiLlama's BTCfi category and per-protocol pages, May 2026. Protocol mechanics verified against each project's docs: Babylon, Stacks, BoB, Bitlayer, Merlin, Sovryn, Alex, Threshold Network, BitGo, Coinbase, Mantle, Circle. cirBTC details from circle.com/cirbtc and Circle's 2026 announcement. Numbers shift daily. Re-verify before citing in production contexts.
​

Sources: DeFiLlama BTCfi category, Babylon docs, Stacks docs, BoB docs, Bitlayer docs, Merlin docs, Sovryn docs, Alex docs, Threshold Network docs, BitGo WBTC site, Coinbase cbBTC announcement, Mantle FBTC docs, circle.com/cirbtc.
​