The Bitcoin DeFi Ecosystem Explained

In addition to wBTC, Stacks, and Rootstock, BadgerDAO, RenVM, and Liquid Network are promoting various Bitcoin DeFi use cases.


A decentralized autonomous organization (DAO) called BadgerDAO enables BTC to be used as collateral in various DApps. BadgerDAO uses the Ethereum-based token for BADGER protocol management and incentive distribution.

Users can earn income from their synthetic BTC assets using Sett Vaults, the first product offered by Badger. Users can lock their tokenized Bitcoin in SETTs, which are a pool of tokens, and let smart contracts manage their holdings to provide returns in the form of bTokens.

Badger’s second product, called Digg, is software that monitors an elastic supply cryptocurrency called the DIGG token, which is tied to the price of BTC in USD. Like any other token, DIGG can be deposited in SETTs to provide returns to its holders and used in DeFi protocols.


Ren’s decentralized Ethereum protocol creates tokens that control the value of non-Ethereum assets like Bitcoin and offers liquidity to several blockchain projects. That said, Bitcoin holders can use Ren (need to pay nodes) to access Ethereum’s array of DeFi products without having to sell their BTC or move their assets across blockchains.

The Ren virtual machine stores initial funds in storage, accepts tokens from one blockchain, and uses its RenBridge to generate new tokens on another to exchange assets between blockchains. For example, a user can submit BTC to RenVM, which will issue renBTC, a new Ethereum token that will reflect the original Bitcoin, meaning that when the user wants their Bitcoin back, the transaction can be reversed.

Liquid mesh

The Liquid Network is a Bitcoin layer-2 solution and inter-exchange settlement network that enables the issuance of digital assets such as security tokens, stablecoins and other financial instruments on top of the private and fast Bitcoin blockchain.

LBTC, a wrapped version of Bitcoin, serves as a native token for a “liquid” sidechain. Users send BTC to a lightning network address (a process called “connected” bitcoin network) to use the Liquid Network. A similar amount of LBTC is mined on the Liquid Network and delivered to the user’s address after receiving 102 transaction confirmations.

Additionally, to withdraw BTC, a circuit can be initiated by sending LBTC to a non-recoverable burn address, which upon receiving two separate confirmations, allows a Lightning network member to send the original BTC to the user’s Bitcoin network address.

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