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Trillion-dollar deposited assets in the Bitcoin ecosystem
As of January 2025, the total market value of Bitcoin has reached about 500 billion US dollars. However, most Bitcoin assets are in a "dormant" state and it is difficult to play an effective role on the chain. According to a report by Glassnode, an on-chain data analysis agency, more than 65% of Bitcoin has not moved in the past year, which means that these assets mainly exist in the form of "long-term hoarding" (HODL). In contrast, ETH in the Ethereum ecosystem is more active, mainly because of the prosperity of its DeFi ecosystem, which makes ETH fully utilized in scenarios such as lending, trading, and staking.
The current BTC ecosystem lacks liquidity, affecting overall development
As the earliest cryptocurrency, Bitcoin has long occupied a leading position in market value, but the activity of its financial ecosystem lags far behind Ethereum. This lack of liquidity makes it difficult for BTC to play a core role in on-chain financial applications, hindering the further expansion of the decentralized finance (DeFi) ecosystem. The lack of liquidity not only limits the efficiency of using Bitcoin assets, but also reduces investors' opportunities to obtain additional returns and inhibits market participation.
How do emerging projects such as Avalon Labs try to reshape the liquidity pattern of BTC?
Avalon Labs is an innovative pioneer in the current BTCFi field. Its goal is to release the liquidity of deposited assets by building a financial infrastructure based on Bitcoin. They proposed a model of issuing a yield-based stablecoin USDa with BTC as the core collateral asset, aiming to introduce more on-chain application scenarios for BTC. Through Avalon's CeDeFi hybrid lending platform, users can not only use BTC to obtain stable returns, but also manage assets in a multi-chain environment, promoting the role transformation of Bitcoin in the DeFi market.
Data comparison: the difference in on-chain activity between BTC and ETH
According to the latest data from DeFiLlama, the total locked value (TVL) on the Ethereum chain has exceeded US$70 billion by the end of 2024, accounting for 16% of the total market value of ETH. In contrast, Bitcoin's TVL is less than 2%, showing a significant liquidity gap. · Rapid growth of TVL on the ETH chain: ETH's application in DeFi lending, DEX (decentralized exchange), pledge and other fields makes the turnover rate of its on-chain assets much higher than BTC. · Slow expansion of BTC ecology: Although Bitcoin itself has extremely high security and decentralized characteristics, it lacks sufficient smart contract support and application ecology, making it difficult for its on-chain assets to circulate.
Analysis of the main reasons
BTC has long been regarded as a value storage tool, and insufficient liquidity mining Since its birth, Bitcoin has been called "digital gold" and plays a more value storage role. Due to large price fluctuations and the lack of effective on-chain income means, most holders tend to hold for a long time rather than frequently trade, resulting in a serious lack of on-chain liquidity for BTC.
· BTC lacks ecological infrastructure, and assets are difficult to circulate efficiently. Unlike Ethereum, Bitcoin does not have built-in smart contract functions, which makes it difficult to directly participate in the DeFi ecosystem. At present, the application of BTC in on-chain financial scenarios mainly relies on solutions such as cross-chain bridges and anchored assets (such as WBTC and tBTC). However, these solutions have problems such as insufficient decentralization and complex operations, which further hinder the improvement of BTC liquidity.
Avalon's four core business sectors Avalon activates Bitcoin assets by building a complete financial ecosystem. Its core business includes the following four parts:
· BTC-collateralized income-generating stablecoin USDa: Users can mortgage BTC to the Avalon platform to obtain stablecoin USDa denominated in US dollars, which can be used for on-chain payments, lending or transactions.
·USDa-based lending protocol: Avalon provides a decentralized lending platform based on USDa, allowing users to obtain liquidity without selling BTC.
·Hybrid lending platform connecting DeFi and CeFi: By introducing the CeDeFi model, Avalon combines traditional finance and decentralized finance to provide users with lower borrowing costs and higher capital utilization.
·Decentralized lending protocol supporting BTC pledge: Avalon introduces a BTC pledge solution without third-party custody to ensure the security of user assets while achieving seamless cross-chain lending.
How does Avalon reduce BTC lending risks?
Avalon uses an innovative risk control mechanism in the BTC lending model:
·Fixed 8% lending rate: Compared with the more volatile interest rates in traditional DeFi lending protocols, Avalon provides a fixed interest rate, reducing the uncertainty of users' borrowing costs.
·Professional institution custody of BTC: Avalon works with top custodians to ensure the security and transparency of user assets during the pledge period.
·No need for a third-party cross-chain bridge, and achieve multi-chain compatibility with the help of LayerZero technology: Avalon uses the underlying cross-chain protocol provided by LayerZero to enable BTC to circulate seamlessly on multiple mainstream public chains, avoiding the centralization risk of traditional cross-chain bridges and the hidden dangers of hacker attacks on the fund pool.
Avalon's market positioning and unique advantages Avalon's innovation is not only reflected in its product design, but also in its market strategy and positioning. Unlike traditional BTC lending platforms that are mainly aimed at large users, Avalon pays more attention to providing ordinary users with opportunities to participate, lowering the entry threshold of the BTCFi ecosystem.
·A wider target user group: Avalon is not limited to institutional investors or crypto "whales", but is committed to attracting more ordinary BTC holders and providing them with stable returns and flexible liquidity.
·Balanced strategy of leverage and yield: Through fixed interest rates and liquidity management, Avalon balances leveraged trading and user returns, reduces the market volatility risk caused by excessive leverage, and improves the stability of the overall ecosystem.
The role of USDa:
A key supplement to the BTCFi ecological infrastructure, USDa launched by Avalon is a BTC-collateralized stablecoin, which fills the gap of the long-term lack of native stablecoins in the BTC ecosystem.
·BTC collateral generates USDa and releases liquidity: Users generate USDa of equivalent value by pledging BTC to the Avalon platform for various on-chain financial activities. This mechanism not only helps users retain the long-term appreciation potential of BTC, but also allows them to flexibly obtain liquidity in the short term.
·Interoperability with CeDeFi platform: USDa can be linked to USDT on Avalon's CeDeFi platform, realizing the exchange and value circulation with mainstream stablecoins, further enhancing the market adaptability and user trust of USDa.
Potential Prediction: The Market Size of BTCFi May Reach Hundreds of Billions of Dollars With the Advancement of Projects Such as Avalon, the Potential of Bitcoin in the On-chain Financial Field Is Being Gradually Excavated. Assuming that the Liquidity Release Ratio of BTCFi Reaches 10%, Based on the Current Total Market Value of BTC of 500 Billion Dollars, the Market Size Will Exceed 180 Billion Dollars.
· Further Optimistic Estimates: If BTC Can Reach Ethereum's Current TVL Market Value Ratio (16%), the Market Size of BTCFi Is Expected to Approach 300 Billion Dollars, Becoming a New Engine to Promote the Growth of the DeFi Market.
· BTC's New Role as an On-chain Financial Instrument: After BTC Transforms from a Value Storage Tool of "Digital Gold" to an "On-chain Financial Instrument", It Will Provide Users with More Diverse Investment Portfolios and Income Strategies, Enhance Its Activity and Influence in the Whole Crypto Financial Market.
Build diversified financial products and promote BTC to become a mainstream DeFi asset. The development of BTCFi is not limited to the fields of lending and stablecoins, but also includes a variety of financial services such as derivatives trading, liquidity mining, and decentralized insurance. The launch of these products will further enrich the ecology of BTCFi, create more opportunities for users to earn on-chain income, and make BTC one of the core assets in the DeFi market.
Avalon's competitiveness in the BTCFi track In the BTCFi field, Avalon has gradually become one of the important players in the BTC lending field with its innovative product design and market strategy. According to the latest data, Avalon's TVL growth rate has ranked among the top projects of the same type, and is moving towards the top BTC lending protocol.
·Technical advantages: Avalon uses LayerZero cross-chain technology to achieve multi-chain compatibility, making it one of the few BTCFi projects that can seamlessly connect to mainstream public chains.
·Operational advantages: Avalon emphasizes decentralization and user participation, while introducing the CeDeFi model, providing flexible lending services and stable returns, attracting a large number of BTC holders and new users.
Future challenges: key issues in the development of the BTCFi ecosystem
Although BTCFi has broad prospects, projects such as Avalon also face multiple challenges in the development process: ·User education and market expansion: Compared with Ethereum DeFi users, Bitcoin holders have a lower degree of acceptance of on-chain financial instruments, and more marketing and user education are needed to expand the scale of BTCFi's ecosystem.
·Further improvement of cross-chain compatibility: Although Avalon uses LayerZero technology, in actual operation, cross-chain asset management still has room for improvement in user experience and security.
·Ecological interoperability with mainstream DeFi projects: In the future, Avalon needs to cooperate deeply with DeFi projects on mainstream chains such as Ethereum and BSC to promote the integration of BTCFi with the existing DeFi ecosystem and achieve higher liquidity and ecological synergy.
The rapid rise of BTCFi marks an important change in the crypto financial market. In this process, emerging projects represented by Avalon are injecting new vitality and liquidity into the Bitcoin ecosystem by building diversified on-chain infrastructure such as stablecoins, lending protocols and CeDeFi platforms.
With the launch of more innovative products, Bitcoin's financial attributes will be fully activated, and its position in the DeFi market will gradually improve.
From a "sleeping whale" to a "core financial asset on the chain", BTC's role change may become an important driving force for the next wave of growth in the DeFi market. In the future, we need to continue to pay attention to whether Avalon can steadily advance its ecological construction, continuously launch innovative products, and lead the development trend of the BTCFi track.
If Avalon can successfully break through the current technical and market challenges, Bitcoin will truly enter a "new liquidity era" and open up new growth space for the trillion-level market.
Trillion-dollar deposited assets in the Bitcoin ecosystem
As of January 2025, the total market value of Bitcoin has reached about 500 billion US dollars. However, most Bitcoin assets are in a "dormant" state and it is difficult to play an effective role on the chain. According to a report by Glassnode, an on-chain data analysis agency, more than 65% of Bitcoin has not moved in the past year, which means that these assets mainly exist in the form of "long-term hoarding" (HODL). In contrast, ETH in the Ethereum ecosystem is more active, mainly because of the prosperity of its DeFi ecosystem, which makes ETH fully utilized in scenarios such as lending, trading, and staking.
The current BTC ecosystem lacks liquidity, affecting overall development
As the earliest cryptocurrency, Bitcoin has long occupied a leading position in market value, but the activity of its financial ecosystem lags far behind Ethereum. This lack of liquidity makes it difficult for BTC to play a core role in on-chain financial applications, hindering the further expansion of the decentralized finance (DeFi) ecosystem. The lack of liquidity not only limits the efficiency of using Bitcoin assets, but also reduces investors' opportunities to obtain additional returns and inhibits market participation.
How do emerging projects such as Avalon Labs try to reshape the liquidity pattern of BTC?
Avalon Labs is an innovative pioneer in the current BTCFi field. Its goal is to release the liquidity of deposited assets by building a financial infrastructure based on Bitcoin. They proposed a model of issuing a yield-based stablecoin USDa with BTC as the core collateral asset, aiming to introduce more on-chain application scenarios for BTC. Through Avalon's CeDeFi hybrid lending platform, users can not only use BTC to obtain stable returns, but also manage assets in a multi-chain environment, promoting the role transformation of Bitcoin in the DeFi market.
Data comparison: the difference in on-chain activity between BTC and ETH
According to the latest data from DeFiLlama, the total locked value (TVL) on the Ethereum chain has exceeded US$70 billion by the end of 2024, accounting for 16% of the total market value of ETH. In contrast, Bitcoin's TVL is less than 2%, showing a significant liquidity gap. · Rapid growth of TVL on the ETH chain: ETH's application in DeFi lending, DEX (decentralized exchange), pledge and other fields makes the turnover rate of its on-chain assets much higher than BTC. · Slow expansion of BTC ecology: Although Bitcoin itself has extremely high security and decentralized characteristics, it lacks sufficient smart contract support and application ecology, making it difficult for its on-chain assets to circulate.
Analysis of the main reasons
BTC has long been regarded as a value storage tool, and insufficient liquidity mining Since its birth, Bitcoin has been called "digital gold" and plays a more value storage role. Due to large price fluctuations and the lack of effective on-chain income means, most holders tend to hold for a long time rather than frequently trade, resulting in a serious lack of on-chain liquidity for BTC.
· BTC lacks ecological infrastructure, and assets are difficult to circulate efficiently. Unlike Ethereum, Bitcoin does not have built-in smart contract functions, which makes it difficult to directly participate in the DeFi ecosystem. At present, the application of BTC in on-chain financial scenarios mainly relies on solutions such as cross-chain bridges and anchored assets (such as WBTC and tBTC). However, these solutions have problems such as insufficient decentralization and complex operations, which further hinder the improvement of BTC liquidity.
Avalon's four core business sectors Avalon activates Bitcoin assets by building a complete financial ecosystem. Its core business includes the following four parts:
· BTC-collateralized income-generating stablecoin USDa: Users can mortgage BTC to the Avalon platform to obtain stablecoin USDa denominated in US dollars, which can be used for on-chain payments, lending or transactions.
·USDa-based lending protocol: Avalon provides a decentralized lending platform based on USDa, allowing users to obtain liquidity without selling BTC.
·Hybrid lending platform connecting DeFi and CeFi: By introducing the CeDeFi model, Avalon combines traditional finance and decentralized finance to provide users with lower borrowing costs and higher capital utilization.
·Decentralized lending protocol supporting BTC pledge: Avalon introduces a BTC pledge solution without third-party custody to ensure the security of user assets while achieving seamless cross-chain lending.
How does Avalon reduce BTC lending risks?
Avalon uses an innovative risk control mechanism in the BTC lending model:
·Fixed 8% lending rate: Compared with the more volatile interest rates in traditional DeFi lending protocols, Avalon provides a fixed interest rate, reducing the uncertainty of users' borrowing costs.
·Professional institution custody of BTC: Avalon works with top custodians to ensure the security and transparency of user assets during the pledge period.
·No need for a third-party cross-chain bridge, and achieve multi-chain compatibility with the help of LayerZero technology: Avalon uses the underlying cross-chain protocol provided by LayerZero to enable BTC to circulate seamlessly on multiple mainstream public chains, avoiding the centralization risk of traditional cross-chain bridges and the hidden dangers of hacker attacks on the fund pool.
Avalon's market positioning and unique advantages Avalon's innovation is not only reflected in its product design, but also in its market strategy and positioning. Unlike traditional BTC lending platforms that are mainly aimed at large users, Avalon pays more attention to providing ordinary users with opportunities to participate, lowering the entry threshold of the BTCFi ecosystem.
·A wider target user group: Avalon is not limited to institutional investors or crypto "whales", but is committed to attracting more ordinary BTC holders and providing them with stable returns and flexible liquidity.
·Balanced strategy of leverage and yield: Through fixed interest rates and liquidity management, Avalon balances leveraged trading and user returns, reduces the market volatility risk caused by excessive leverage, and improves the stability of the overall ecosystem.
The role of USDa:
A key supplement to the BTCFi ecological infrastructure, USDa launched by Avalon is a BTC-collateralized stablecoin, which fills the gap of the long-term lack of native stablecoins in the BTC ecosystem.
·BTC collateral generates USDa and releases liquidity: Users generate USDa of equivalent value by pledging BTC to the Avalon platform for various on-chain financial activities. This mechanism not only helps users retain the long-term appreciation potential of BTC, but also allows them to flexibly obtain liquidity in the short term.
·Interoperability with CeDeFi platform: USDa can be linked to USDT on Avalon's CeDeFi platform, realizing the exchange and value circulation with mainstream stablecoins, further enhancing the market adaptability and user trust of USDa.
Potential Prediction: The Market Size of BTCFi May Reach Hundreds of Billions of Dollars With the Advancement of Projects Such as Avalon, the Potential of Bitcoin in the On-chain Financial Field Is Being Gradually Excavated. Assuming that the Liquidity Release Ratio of BTCFi Reaches 10%, Based on the Current Total Market Value of BTC of 500 Billion Dollars, the Market Size Will Exceed 180 Billion Dollars.
· Further Optimistic Estimates: If BTC Can Reach Ethereum's Current TVL Market Value Ratio (16%), the Market Size of BTCFi Is Expected to Approach 300 Billion Dollars, Becoming a New Engine to Promote the Growth of the DeFi Market.
· BTC's New Role as an On-chain Financial Instrument: After BTC Transforms from a Value Storage Tool of "Digital Gold" to an "On-chain Financial Instrument", It Will Provide Users with More Diverse Investment Portfolios and Income Strategies, Enhance Its Activity and Influence in the Whole Crypto Financial Market.
Build diversified financial products and promote BTC to become a mainstream DeFi asset. The development of BTCFi is not limited to the fields of lending and stablecoins, but also includes a variety of financial services such as derivatives trading, liquidity mining, and decentralized insurance. The launch of these products will further enrich the ecology of BTCFi, create more opportunities for users to earn on-chain income, and make BTC one of the core assets in the DeFi market.
Avalon's competitiveness in the BTCFi track In the BTCFi field, Avalon has gradually become one of the important players in the BTC lending field with its innovative product design and market strategy. According to the latest data, Avalon's TVL growth rate has ranked among the top projects of the same type, and is moving towards the top BTC lending protocol.
·Technical advantages: Avalon uses LayerZero cross-chain technology to achieve multi-chain compatibility, making it one of the few BTCFi projects that can seamlessly connect to mainstream public chains.
·Operational advantages: Avalon emphasizes decentralization and user participation, while introducing the CeDeFi model, providing flexible lending services and stable returns, attracting a large number of BTC holders and new users.
Future challenges: key issues in the development of the BTCFi ecosystem
Although BTCFi has broad prospects, projects such as Avalon also face multiple challenges in the development process: ·User education and market expansion: Compared with Ethereum DeFi users, Bitcoin holders have a lower degree of acceptance of on-chain financial instruments, and more marketing and user education are needed to expand the scale of BTCFi's ecosystem.
·Further improvement of cross-chain compatibility: Although Avalon uses LayerZero technology, in actual operation, cross-chain asset management still has room for improvement in user experience and security.
·Ecological interoperability with mainstream DeFi projects: In the future, Avalon needs to cooperate deeply with DeFi projects on mainstream chains such as Ethereum and BSC to promote the integration of BTCFi with the existing DeFi ecosystem and achieve higher liquidity and ecological synergy.
The rapid rise of BTCFi marks an important change in the crypto financial market. In this process, emerging projects represented by Avalon are injecting new vitality and liquidity into the Bitcoin ecosystem by building diversified on-chain infrastructure such as stablecoins, lending protocols and CeDeFi platforms.
With the launch of more innovative products, Bitcoin's financial attributes will be fully activated, and its position in the DeFi market will gradually improve.
From a "sleeping whale" to a "core financial asset on the chain", BTC's role change may become an important driving force for the next wave of growth in the DeFi market. In the future, we need to continue to pay attention to whether Avalon can steadily advance its ecological construction, continuously launch innovative products, and lead the development trend of the BTCFi track.
If Avalon can successfully break through the current technical and market challenges, Bitcoin will truly enter a "new liquidity era" and open up new growth space for the trillion-level market.
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