I didn't expect the topic of "BTCFi is dead" to come up so quickly. Indeed, since the launch of @babylonlabs_io, the market has anticipated that Babylon would boost the BTCFi sector with its ecosystem, but clearly, things have not gone as expected. As for whether BTCFi is dead, I believe it is too early to make that judgment, and there is a misunderstanding of the evolution logic of the BTCFi sector. Following this, I would like to share a few observations:
1) One point is that linking the market performance after Babylon's launch to the prospects of the BTCFi sector is clearly misguided.
Babylon can lock users' BTC assets in the Bitcoin mainnet in the form of script contracts while providing "security consensus services" on various BTC layer 2s, thus obtaining rich returns from other extended chains. From the supply side, Babylon's technological innovation services are indeed useful, but from the demand side, who will purchase such security consensus services, and who will provide continuous returns?
Clearly, from the perspective of B-end demand for "security consensus" from various new chains, the prospects for BTCFi are not as optimistic as expected. However, from the C-end user demand perspective, every BTC holder has a need for continuous income from their BTC holdings, and the goal of BTCFi's technical solutions is to connect with trillions of dollars in traditional financial capital. The ultimate goal of this BTCFi narrative is how to integrate Bitcoin's unique decentralized consensus with global financial liquidity.
Following this logic, in the post-ETF era, the BTCFi narrative has just begun; where does the notion of it being dead come from?
2) In fact, the technical solutions surrounding BTCFi have been maturing. From the initial EVM-Compatible to UTXO Stack architecture, then to zkVM protocol framework, RGB client verification framework, optimistic challenge proof (OCP) architecture, etc., BTC's technical solutions have once shown a chaotic state. However, while it may seem scattered and chaotic on the surface, it is actually evolving naturally in line with market choices.
The following compares two technical paths: OP_CAT and BitVM2, arguing that BitVM2 has more potential because it does not require changes to BTC's existing scripts:
OP_CAT path - logically reasonable but requires changes to BTC OpCodes, which is difficult for core developers to accept.
BitVM2 + OCP mechanism - achieves off-chain computation and interaction through the OCP challenger mechanism. When a "challenge" occurs, it executes the on-chain protocol on the Bitcoin mainnet, with Bitcoin layer 1 acting as an arbitrator to ensure security.
Immature solutions will be eliminated or corrected under market pressure. For example, early Bitcoin cross-chain solutions commonly adopted centralized custody models, while now the combination of BitVM2 and OCP can provide a trustless native secure cross-chain mechanism.
When technologies like BitVM2 that do not require changes to BTC's core code mature, Bitcoin will welcome its "OP moment," just as Ethereum's value in Optimistic Rollups was recognized, directly sparking a wave of market ecosystem explosion.
3) For now, let the technical solutions continue to evolve, as there is another layer of logic: the biggest challenge facing BTCFi is not technical feasibility, but a sustainable Tokenomics economic model.
Currently, many solutions rely on token issuance and incentives, which are clearly unsustainable. A truly sustainable BTCFi economic model should be built on the network's use value. When the second-layer network processes transactions and collects fees, part of the revenue is returned to BTC stakers, forming a value cycle based on actual demand.
This model does not rely on external chain procurement but generates revenue through services within its own ecosystem, which is significantly superior in terms of economic model sustainability.
In summary, looking at it from a different perspective, the prospects for BTCFi become clear. The sector is currently in the early stages of infrastructure construction, with technical solutions converging and Tokenomics economic models being refined, while the door to global financial liquidity access through ETFs has just begun to open.
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