Unlocking Bitcoin Value: The Rise of a New Lending Ecosystem

Bitcoin, as the largest and highest quality "funding pool" in the crypto world, has always attracted industry attention for its potential value. Recently, Avalon Labs, the largest on-chain lending protocol in the Bitcoin ecosystem, completed a $10 million Series A financing, marking the acceleration of the trend to transform BTC from a mere store of value into a more active financial tool.

In fact, the Bitcoin ecosystem is expanding towards richer on-chain structured yield scenarios. If we can activate the dormant BTC and build an efficient and secure liquidity network, it will open up global imaginative space for this trillion-dollar asset as a DeFi niche asset.

Data shows that as of January 9, 2025, the total locked value on the Ethereum chain exceeds 64 billion USD, a significant increase of nearly 180% compared to January 2023. In contrast, although the market capitalization and price increase of BTC are more favorable, its on-chain ecosystem expansion speed still lags behind that of Ethereum. It is worth noting that if BTC liquidity is released by 10%, it would create a market of up to 180 billion USD. If it can reach a TVL ratio similar to ETH's 16%, it is more likely to release about 300 billion USD of liquidity.

This immense potential has driven explosive growth in the BTCFi ecosystem. Avalon, as a platform that "allows anyone to benefit from BTC lending," has become one of the largest lending protocols in the BTC ecosystem. Its TVL has exceeded $2 billion, and the Bitcoin stablecoin USDa, launched just one week ago, has surpassed $500 million in locked value, creating the fastest-growing lending protocol record in DeFi history.

Avalon's success stems from its unique operating model: the lending interest rate is fixed at 8%, with Bitcoin collateralized and managed by professional institutions, while the stablecoin is supplied in unlimited quantities. This not only allows BTC holders to gain greater liquidity but also provides retail investors with a safe opportunity to participate.

From the perspective of stablecoins, on-chain decentralized stablecoins are still dominated by debt-collateralized positions (CDP). The Avalon ecosystem includes yield-bearing stablecoins USDa based on Bitcoin collateral, lending protocols based on USDa, a hybrid lending platform connecting DeFi and CeFi, and a decentralized lending protocol that supports BTC staking.

USDa not only solves the stablecoin problem that has long plagued the Bitcoin ecosystem, but also achieves cross-chain compatibility through LayerZero technology. Users can seamlessly operate USDa in multiple DeFi ecosystems, indirectly bringing liquidity from the Bitcoin ecosystem to other chains. This provides an efficient framework for utilizing assets and activating dormant BTC in the Bitcoin network.

As Bitcoin assets gradually emerge from dormancy, BTCFi is expected to become a new DeFi asset direction with a scale of hundreds of billions of dollars. By building diverse financial product forms and DeFi scenarios centered around BTC, it will redefine BTC's role in the entire network of DeFi. Whether the deep integration of BTC in the DeFi field can reach a critical turning point is worth the market's continued attention.