DeFi: Ethereum vs BTCFi — The Battle for Liquidity

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GoMining
@GoMining_tokenSep 30, 2025

The Spaces convened a global panel—host Foxy, Shankey (Chunky), Farraj (CrossCurve), Bubba, Veggy, and Dormant—to examine BTCFi versus Ethereum DeFi, institutional adoption, and the "digital gold" narrative. Farraj framed Bitcoin as a digital commodity with strong cultural resistance to programmability, arguing BTCFi will grow but remain a small slice of Bitcoin’s overall TVL while true DeFi leadership stays with Ethereum, bolstered by ETFs and L2s. Chunky emphasized Ethereum’s network effects and suggested Solana could nibble at market share as performance and reliability improve. Dormant highlighted the rise of BTC yield-bearing protocols (often custodian-backed) and broader payment integrations as signs of mass adoption. Veggy expressed bullish views on Ethereum’s trajectory; Bubba saw BTCFi as a contender but endorsed Ethereum’s continued dominance. A roundtable on why Bitcoin is called digital gold centered on scarcity and store-of-value, with Farraj delivering a detailed historical and macro contextualization—from Mt. Gox and mining shifts to U.S. regulatory evolution and potential government reserve dynamics. The host closed by contrasting gold’s passive storage with crypto’s capacity for on-chain yield, noting retail-friendly strategies via DeFi and wrapped BTC while urging vigilance on emerging BTCFi trends.

BTCfi vs. Ethereum DeFi – Twitter Spaces Panel Notes

Overview

  • Purpose: A global panel discussed the rise of BTCfi (Bitcoin finance) versus the dominance of Ethereum-based DeFi, exploring adoption, yield, institutions, programmability, and cross-chain realities.
  • Tone: Informal, debate-style, with recurring reminders to avoid market predictions. Focus stayed on ecosystems, builders, tools, and real-world adoption rather than price talk.
  • Geographies: Foxy (host) cited a global panel—Farraj (Dubai), Chunky (United States), Foxy (CIS region). Veggie and Bubba did not share locations.

Participants (names as introduced)

  • Foxy (Host/Co-host): Moderator guiding the discussion on BTCfi vs. Ethereum DeFi and retail opportunities.
  • Farraj: Co-founder, Cross Curve Protocol (cross-chain bridge & DEX partner of Curve Finance, 1inch, others; ~$4B volume in ~18 months). Also co-founded a Crypto Executives community for fund-raising and advisory.
  • Chunky (also referred to as Shankey in one intro segment): BD/program manager background; neutral stance between Bitcoin and Ethereum; active across Web3.
  • Veggie: Self-described “multi-chain maxi,” positions wherever liquidity flows.
  • Bubba: Crypto enthusiast since ~2022; newer to the space; retail-focused perspective.
  • Dormant (appeared under “Nick” briefly): Marketing/shilling humor; commented on BTC yield protocols and mass adoption dynamics.

Core Theme: Can Ethereum maintain DeFi dominance as BTCfi rises?

  • Farraj’s take (macro + technical):

    • BTC widely accepted as “digital gold”/commodity (21M cap, mined). Conventional finance (e.g., JPMorgan, BlackRock) frames BTC as commodity and store of value, not a programmable smart-contract platform.
    • Bitcoin governance and culture: Strong BTC maximalist resistance to embedding programmability at L1; historically the main ledger stayed conservative despite forks and attempts.
    • Ethereum’s edge: EVM became the largest programmable decentralized finance platform, attracting most innovation (L2s, advanced financial primitives). Stablecoins, not Lightning, became the mainstream crypto payment rail.
    • Expectation: BTCfi will continue to innovate but remain a smaller slice of BTC’s overall TVL; Ethereum DeFi likely outpaces Bitcoin DeFi due to native programmability and institutional gravitation toward Ethereum (ETF approvals, Coinbase’s L2 Base).
    • Business angle: Cross-chain opportunities exist. BTC wrappers are widespread but non-standardized; FX/wrap margins are high—good for cross-chain businesses like Cross Curve.
    • Macro caveat: BTC has traded like a risk asset alongside NASDAQ. In high-inflation or recession scenarios, unclear if BTC will act as a true defensive asset; institutions still favor Ethereum for programmable finance.

  • Chunky’s take:

    • Ethereum is the current leader because money and apps already live there; institutions tolerate higher fees for a tried-and-true, mature network.
    • Over time, expects Solana to “eat away” some market share as users experience fast transactions and low fees, especially if outages continue to recede. Near-term (2025–2026), Ethereum remains the dominant DeFi hub.

  • Veggie’s take:

    • Strongly bullish on Ethereum’s trajectory and validator dynamics; sees recent rapid appreciation and a growing validator base as positive structural signals (kept price predictions out per host’s rules).

  • Bubba’s take:

    • BTCfi is already a contender, but Ethereum introduced DeFi first and remains the major player institutions prefer. Dominance will likely continue on Ethereum; BTCfi’s future exists but will take time.

  • Dormant’s take:

    • Notes an emergent wave of BTC yield-bearing protocols across chains (often chain-agnostic, using custodians like Copper or similar institutions to custody BTC and deliver yields in lending/earn products and wallets).
    • Sees DeFi and TradFi lines blurring with gateways (e.g., crypto cards, fiat ramps), and mainstream players exploring BTC liquidity provisioning. Highlights “Ethena” (likely) as a strong competitor—delivers funding and yield for multi-asset positions on Ethereum, though it also touches BTC—thus ETH DeFi remains a gravity well for sophisticated yield.
    • Observes on-chain rotation dynamics—Ethereum to BTC—arguing BTC narratives are gaining traction.

BTC as “Digital Gold” – Why that narrative persists

  • Short answers from panel:

    • Chunky: Store of value with strictly limited supply (21M); not much native utility beyond “hold it because it’s valuable.”
    • Veggie: Scarcity plus demand mechanics—finite supply meets escalating demand from retail and institutions; price pressure parallels gold scarcity dynamics.
    • Bubba: BTC’s core purpose is store-of-value; hence “future digital gold.”
    • Dormant (humor): “Because it’s shiny and rare.”

  • Farraj’s expanded historical perspective:

    • Early perceptions: For years, BTC was niche/high-risk, associated with gray-market use.
    • Adoption inflection: Decentralized mining and the idea of a censorship-resistant, borderless asset took root. China’s industrial-scale mining, later bans, and hash-rate migrations (Kazakhstan, US, Russia) shaped the commodity-like production narrative: BTC is “mined” via electricity arbitrage (hydropower, natural gas, nuclear), reinforcing commodity framing.
    • Media cycle + altcoin expansions: Cycles of BTC adoption followed by altcoin manias created broader awareness and press—keeping BTC No.1 in mindshare even as outcoins emerged.
    • Regulation and institutions: US Senate engagement, stablecoin focus (e.g., USDC/USDT integration), and major funds moving from skepticism to cooperation matured the space.
    • Macro role and reserves: Speculation if governments could someday hold BTC akin to gold reserves. While not near-term, any such trend would exponentially elevate BTC demand; for now, BTC remains treated like a commodity with volatile demand.
    • Risk vs defense: Historically BTC traded as a high-risk asset (rose alongside risk-on markets, not counter-cyclic like gold). The test is whether BTC flips into a defensive asset during sustained high-rate environments or recessions.

BTC Yield: Is true BTC-native yield feasible?

  • Foxy’s prompt: Could BTC yield products become retail-friendly alternatives to traditional banking yields (~2–5% APR), pushing mass adoption?

  • Farraj’s answer:

    • Likely no near-term for a fully BTC-based programmable bank/lending infrastructure at L1 due to cultural resistance.
    • However, BTCfi will continue via wrappers on L1/L2s, cross-chain protocols, custodial solutions, and specialized L2/sidechain efforts (e.g., Stacks, Rootstock, Citrea-like initiatives) using BTC for security while running logic off-chain or in adjacent environments.
    • Expect corporate blow-ups and custody/lending failures alongside successes—BTC maxis will cite such failures as validation of “just hold on hardware wallets.”
    • Institutions and exchanges are launching chains and L2s (e.g., Base; others building “Unit Chain” type initiatives)—most innovation and yield-engineering will remain anchored on Ethereum.

  • Dormant’s additions:

    • Yield-bearing BTC protocols are emerging across ecosystems (custody-backed yield, lending to institutional LPs), indicating mainstream interest. Some projects already lend BTC to large traditional finance LPs, pointing to real-world BTC capital flows.
    • “Ethena” (synthetic yield via delta-neutral strategies) exemplifies Ethereum’s ability to capture BTC-related yield demand without BTC’s native programmability.

  • Retail perspectives:

    • Foxy: Uses DeFi tools on Ethereum to grow holdings without additional buy-ins; sees the appeal for retail to “increase amount” via yield rather than pure accumulation. Notes BTC yield options are fewer and often via wrapped BTC on EVMs.
    • Bubba: For small BTC holders (e.g., 0.0001 BTC), the instinct is still to hold, but BTCfi’s future offers potential alternatives.

Interoperability, Bridges, and Wrappers

  • Farraj: Cross-chain is economically attractive—BTC wrappers exist everywhere but lack a single standard; this creates wide FX spreads and margins for cross-chain businesses.
  • Chunky: Bridges have historically been weak, and tribalism is strange but real; over time, better interoperability will reduce tribal dynamics.
  • Dormant: Chain-agnostic BTC yield protocols will rise; institutional-grade custody and integrations are central to this wave.

Institutional & Regulatory Momentum

  • Ethereum: ETF approvals signal institutional acceptance; Base (Coinbase L2) shows centralized exchanges building programmable infrastructure.
  • Payments: Lightning had mixed success; stablecoins became the mainstream rail for crypto payments (what got adopted at scale).
  • Bitcoin governance: Expect resistance to major changes, with potential exception for future quantum resistance upgrades.

Culture and “Tribalism” in Crypto

  • Observations: Web3 tribalism (ETH vs BTC vs SOL vs ADA, etc.) influences narratives more than fundamentals. Panel humor highlighted Cardano/Solana jabs, but broader consensus acknowledged multi-chain realities and the importance of usability: fast, cheap, reliable networks win user mindshare.

Risks and Constraints Called Out

  • Smart contract risk and custody risk in yield products, especially BTC-backed yield via custodians or bridges.
  • Institutional caution in BTCfi (relative to ETH DeFi) due to programmability gaps and culture.
  • Macro uncertainties: BTC’s role in recessionary environments remains unproven as a defensive asset.
  • BTC maximalist resistance limits native programmability and thus complex on-chain finance at L1.

Key Takeaways

  • Ethereum remains the gravity center of programmable finance and institutional DeFi. BTCfi will grow, but as a smaller share focused on wrappers, cross-chain infrastructure, and custodial yield.
  • BTC’s “digital gold” narrative rests on scarcity, decentralized production, censorship resistance, and evolving institutional/regulatory acceptance—yet it has historically behaved like a risk asset.
  • Yield for BTC exists mainly via EVM wrappers, cross-chain, and custody-backed solutions; truly native BTC programmability is unlikely near-term.
  • Solana may chip away at DeFi market share due to UX advantages (speed, fees), especially if reliability continues to improve—while Ethereum holds leadership in 2025–2026.
  • Retail can pursue yield to grow holdings without additional buying, but risks (bridge/custody/strategy) must be managed; holding BTC remains the pure-store-of-value strategy.

Notable Highlights

  • Cross Curve has facilitated ~$4B volume across ecosystems, partnering with Curve Finance, 1inch; sees strong margins in BTC wrapper markets due to non-standardization.
  • Stablecoins outpaced Lightning in real-world payment adoption.
  • Institutional signals: ETH ETFs, Base L2; custodial integrations enabling BTC yield products.
  • L2s/sidechains around BTC (e.g., Stacks, Rootstock) are the plausible paths for BTC-adjacent programmability, not Bitcoin L1.

Open Questions for Builders and Investors

  • How quickly will BTCfi mature, and which models (custodial, wrapper-based, L2/sidechain) will become dominant?
  • Can BTC achieve a truly defensive asset profile during sustained high-rate or recessionary periods?
  • Will governments ever accumulate BTC at scale as a reserve asset—transforming demand dynamics?
  • Can interoperability and bridge security advance enough to dissolve tribalism and enable seamless cross-chain finance?

Closing

  • The panel stayed focused on ecosystems, builders, and adoption while avoiding price predictions. Consensus: Ethereum leads programmable finance; BTC remains digital gold and a core store of value. BTCfi is advancing—primarily via cross-chain/custodial mechanisms—offering emerging opportunities for retail and institutions, but with meaningful risks and cultural constraints.