Welcome to BitcoinFi Weekly. We cover where people use their BTC and what is changing in the Bitcoin world.

They say cash rules everything around me, but I find that it just inflates everything around me. Bitcoin, on the other hand, strips away the excess and leaves only what matters. Over the years, Bitcoin has been analyzed, debated, and speculated upon as a form of money—its role shifting from a rouge currency to a global financial paradigm. As institutions build their empires upon it and developers craft new tools to shape it, the truth stands as clear as the sky at dawn: Bitcoin is money. But the compelling part is how it's being used and, more poignantly, how it will be used.

Here’s this week’s rundown:

📈 Feature Piece: Exploring the Future of Bitcoin as Money

🛠️ Bigmi Brings Better Tools for Bitcoin Development

♻️ Restake tBTC with InceptionLRT

🐛 Inching Closer to STARKs on Bitcoin

🏗️ SaltLayer Details Architecture

Feature Piece: Exploring the Future of Bitcoin as Money

The future of money isn’t being negotiated behind closed doors at some new Bretton Woods—it's unfolding in the open.  The idea of Bitcoin as money has come full circle, and it involves converging two parallel paths: mainstream adoption and expanding programmability.

This isn’t happening in a vacuum. Bitcoin's evolution is playing out in parallel with the same forces that once shaped the early days of mortgages and high-yield bonds. Larry Fink, CEO of BlackRock, recently hinted at this transformation when he compared Bitcoin's current trajectory to those once-nascent financial markets. And if you take a closer look, you begin to see the same markers: a blend of infrastructure being built, analytics sharpening, and institutional adoption gaining steam.

Slowly, Then All at Once

To understand Bitcoin's potential as a mainstream currency, we first need to appreciate its evolving status as an institutional asset. As of 2023, Bitcoin ETFs have become the first major gateway for traditional financial institutions to gain exposure. These funds, traded on regulated exchanges, offer institutional investors a way to hold Bitcoin without the complexities of self-custody. More significantly, ETFs are accelerating Bitcoin’s integration into retirement portfolios, mutual funds, and corporate treasuries.

However, liquidity remains a major hurdle. In the early days of high-yield bonds, market-making mechanisms had to mature to accommodate large-scale trading. For Bitcoin, this means improved trading infrastructure, including futures, options, and other derivative markets that allow institutional investors to hedge against volatility. Simultaneously, institutional-grade custody solutions must become widely available to ensure that Bitcoin holdings are both secure and insurable. This infrastructure is the bedrock that will support larger flows of institutional capital into Bitcoin.

Integrating into the Institutional Portfolio

Once these building blocks are in place, institutional adoption will accelerate. Pension funds, sovereign wealth funds, and insurance companies will systematically integrate Bitcoin into their portfolios, viewing it as a diversification tool and inflation hedge. Bitcoin-backed products—such as ETPs (exchange-traded products), Bitcoin bonds, and structured financial products—will become commonplace in this phase.

Liquidity management will drive institutions' Bitcoin usage. Much like gold or treasury bonds, Bitcoin will become part of institutional portfolios, enabling investors to move in and out of positions based on macroeconomic trends. The risk-on/risk-off dynamics that Bitcoin exhibits today will become more pronounced as institutions use it to hedge against market downturns, particularly during periods of economic instability.

Bitcoin ETFs will fuel this growth, providing a low-cost, tax-efficient vehicle for large-scale investors. As regulations favor these ETFs, Bitcoin will become as ubiquitous in portfolios as iShares ETFs are for equities and bonds.

Bitcoin as a Core Asset Class

As Bitcoin integrates more deeply into the global financial system, it will cease to be seen as an "alternative" asset. At this stage, financial institutions worldwide will treat Bitcoin as part of their core holdings, alongside stocks, bonds, and real estate. This maturation will unlock several new use cases:

1. Bitcoin Collateralization: Just as real estate or equities are used as collateral for loans, Bitcoin will serve as collateral in both corporate and consumer lending markets. This will allow companies to borrow against their Bitcoin holdings without needing to sell them, making Bitcoin supernormal.
2. Bitcoin-Based Financial Products: Expect to see a rise in structured products, yield-generating instruments, and asset-backed securities based on Bitcoin. These will allow institutions to offer tailored solutions for clients seeking exposure to Bitcoin while managing risk efficiently.
3. Institutionalization of Bitcoin Derivatives: As Bitcoin derivatives markets grow, so too will their offerings. Futures, swaps, and options will be traded globally, allowing investors to hedge exposure or speculate on price movements with far more flexibility than today.
4. Bitcoin Yield Products: As traditional and onchain staking and lending mechanisms develop, institutional investors will seek out ways to generate yield on their Bitcoin holdings. Bitcoin yield strategies will become a key part of institutional portfolio construction at this stage.
5. Bitcoin as a Global Reserve Asset: At this point, Bitcoin may begin to serve as a reserve asset for central banks and sovereign wealth funds, especially in countries facing volatile fiat currencies. While Bitcoin may not replace fiat, it will likely serve as a non-sovereign store of value—akin to gold—and could become a hedge against global currency instability.

Bitcoin’s Evolving Programmability

As more people onboard, it’s becoming clear that Bitcoin, as it stands, cannot support that kind of volume. As a result, many new primitives and upgrades have been introduced to provide much-needed scalability.  The introduction of Taproot, BRC-20s, BitVMs, and Layer 2s marks the beginning of Bitcoin’s transformation from the simple whitepaper Satoshi originally put out.

But this surge in programmability has also come with growing pains. The rise of Ordinals and BRC-20 tokens has led to a spike in transaction sizes, with some inscriptions taking up as much as 4MB of space. This has driven up transaction fees, leading to a contentious debate within the Bitcoin community. Some purists argue that Bitcoin should remain focused on low-cost, peer-to-peer transactions, while others see these new innovations as essential to Bitcoin’s long-term growth.

Despite these challenges, the momentum behind Bitcoin’s evolution as both an asset class and a programmable platform is undeniable. As institutional adoption accelerates, so too will the demand for Bitcoin-based financial products.

It’s not hard to imagine a future where Bitcoin is used as loan collateral, just like real estate or equities. Major financial institutions could offer Bitcoin-backed loans, allowing businesses and individuals to leverage their holdings for liquidity without needing to sell. The derivatives markets for Bitcoin will expand, offering more sophisticated tools for managing risk and speculation. And perhaps most importantly, Bitcoin will one day serve as a global reserve asset.

BitcoinFi Updates

Bigmi Brings Better Tools for Bitcoin Development

The LiFi gigabrains bring us a new tool to streamline the creation of UTXO-based applications. Bigmi, short for "Bitcoin Is Gonna Make It," is a TypeScript library offering reactive primitives tailored to the Bitcoin ecosystem. Bigmi focuses on delivering a smooth experience for Bitcoin app development, offering abstractions over the Bitcoin JSON-RPC API, React hooks for managing accounts, and wallet connectors—all designed specifically for UTXO chains.

Although, Bigmi is still finding its feet. The LiFi team is currently working on adding essential React hooks, expanding wallet connector support, and eliminating dependencies on Wagmi/Viem to make it fully independent. By addressing gaps in the ecosystem, such as inconsistencies in wallet implementations and the need for standardized connections, Bigmi sets the stage for more seamless BitcoinFi experiences. This means more reliable infrastructure for building DeFi on Bitcoin, improved interoperability, and a smoother path to integrating Bitcoin into the broader dApp world.

Restake tBTC with InceptionLRT

InceptionLRT has integrated tBTC, its first Bitcoin derivative, into its pool of liquid restaking solutions. This integration allows users to restake their Bitcoin while retaining liquidity, optimizing yield without sacrificing Bitcoin exposure. Users can now restake tBTC through EigenLayer on InceptionLRT's platform. intBTC offers several advantages, including yield optimization, isolated risk management, and instant withdrawals via Flash Unstake.

Inching Closer to STARKs on Bitcoin

STARKs on Bitcoin are moving closer to reality, thanks to Weikeng Chen. He has implemented a new verifier in Bitcoin Script using a technique called "Circle Plonk," which, with the help of the OP_CAT opcode, makes verifying arithmetic circuits much faster and cheaper than direct computation. This is pretty significant because arithmetic circuit verification is key to enabling more complex cryptographic proofs on-chain, like those used in STARKs.

The verifier has been successfully tested on Bitcoin Signet and Fractal Bitcoin. The real innovation here is the custom Domain Specific Language (DSL) that Weikeng developed. This DSL helps manage stack variables and supports modular programming in Bitcoin Script, simplifying development for other Bitcoin Script-based logic.

The next big step in this process is to use this new verifier to validate the execution of the Cairo CPU, a core component of the Starknet framework. Starknet currently settles on Ethereum, but this brings us closer to a world where Starknet could settle on both Ethereum and Bitcoin. However, this is still an early-stage development. There’s a long road ahead before STARKs are fully operational on Bitcoin, but this work on Circle Plonk and the custom DSL could prove to be huge.

SaltLayer Details Architecture

SatLayer, built on Babylon, introduces restaking capabilities for Bitcoin, allowing BTC holders to secure dApps and protocols through “Bitcoin-backed crypto-economic guarantees.” By restaking Bitcoin staked in Babylon, SatLayer provides programmable slashing for operator misbehavior, extending Bitcoin's security beyond Babylon’s focus on validator misbehavior in PoS chains. This opens new avenues for Bitcoin to act as a security layer for various applications, from lending protocols to DEXs.Babylon allows Bitcoin holders to lock their BTC into a staking vault, providing slashable stake to secure PoS chains against double-signing attacks. While Babylon ensures Bitcoin-backed finality, SatLayer enhances this by enabling a broader set of applications to use Bitcoin for security guarantees, addressing issues like liveness, fairness, and correctness. SatLayer’s on-chain component, deployed on Babylon’s CosmWasm smart contract layer, allows developers to create arbitrary slashing conditions to secure applications.

The SatLayer ecosystem comprises four key participants: restakers, operators, Bitcoin Validated Services (BVS), and slashers. Restakers delegate Bitcoin collateral to operators, who validate BVSs and earn yield. BVSs utilize restaked Bitcoin to secure their operations, while slashers ensure integrity by identifying and punishing misbehavior. This system allows a wide range of applications, such as lending protocols, cross-chain bridges, and Bitcoin-backed stablecoins, to be secured by restaked Bitcoin.

SatLayer's architecture aims to solve the “cold start problem” for many protocols by allowing them to use Bitcoin-backed security guarantees instead of relying solely on their own utility tokens.

Closing Thoughts

The sun rises on a new era of Bitcoin. The foundations are laid, but the towers are yet to be built. Bitcoin isn't just surviving; it's thriving, evolving, and becoming more than even Satoshi might have imagined. From ETFs to STARKs, from restaking to programmable money, Bitcoin is reshaping the world as we know it.

And to those who want to shape this change, the BitcoinFi Accelerator calls. With $150,000 in seed funding on the table and a chance to contribute to the greatest on-chain ecosystem, now is the time. Applications are open until October 23rd. If you’ve got a working demo or MVP that’s ready for the next level, apply now!

If there's a topic you’d like us to cover or have questions, reach out at [email protected].

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