For the past two cycles, Bitcoin DeFi has lived more as a promise than a category.
Programmable Bitcoin remained a vision of a kind of Bitcoin maxi, which believes that the world’s largest cryptocurrency can become productive without losing the security and sound characteristics of money.
However, the shutdown of Bitcoin scaling platform Botanix earlier this month put that vision into question.
If a well-funded, technically ambitious Layer 2 of Bitcoin with working applications, integrations, and competitive returns can’t attract enough usage to survive, does that mean Bitcoiners simply don’t care about decentralized finance?
Bitcoin DeFi will remain a niche proposition in 2026, despite years of being touted as the next massive thing.
DefiLlama panel can be seen just $4.12 billion in total value locked (TVL) across all Bitcoin DeFi protocols. This is a rounding error compared to Bitcoin’s market capitalization of $1.2 trillion and hundreds of billions held via spot and corporate funds vaults and deposit accounts.
Andre Dragosch, head of research for Europe at Bitwise, told Cointelegraph: “Bitcoin clearly wins as a monetary asset and as a pristine security, but the case for Bitcoin as a standalone DeFi execution layer has always been structurally weaker than the narrative suggests.”
Botanix is closing after four years
When Botanix announced it was going out of business after almost four years of operation and a year of continuous mainnet operation, the team didn’t blame the hack or the regulatory shock; they blamed demand.
Botanix described a network that “worked” in every technical respect: 25 million transactions, 200,000 wallets, and tens of millions of dollars in bridge funds, and yet it never generated the amount of fees needed to cover infrastructure costs.
Users came for yield, treated BTC as a security storing value, and then largely stuck to passive, buy-and-hold strategies rather than actively lending, trading, or moving funds frequently enough to generate significant fee volume.
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Like most BTCFi stacks today, Botanix still requires users to link their Bitcoin to a tokenized version on a separate chain based on the Ethereum Virtual Machine (EVM) before they can access DeFi. This introduces additional assumptions about bridges and clever contracts that worry many Bitcoiners.
Botanix Closing Notice. source: Botanix
Still, Botanix co-founder Willem Schroé told Cointelegraph he wouldn’t change the basic design. Despite Botanix offering what it called “the best rates in the industry” and a security model more tailored to Bitcoin than typical BTC bridges, the BTC to Ethereum wrap still outperformed Botanix’s competition.
He attributed this to Ethereum’s “massive infrastructure network and the Linda Effect,” as well as a combination of liquidity depth, user experience and regulatory comfort.
What Botanix learned about Bitcoin DeFi
The team concluded that Bitcoin is still viewed as a reserve asset rather than something that has programmable utility.
For most existing exploit cases, such as lending, leveraged exposure, or profit, a locked BTC position in a enormous, mature EVM ecosystem like Ethereum is “really sufficient” for most users. Instead of connecting to a Bitcoin-specific EVM chain like Botanix, users preferred to stick with wBTC in places where liquidity, applications, and integrations already exist.
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Botanix also pointed to the consolidation of onchain operations around facilities like Hyperliquid and major centralized exchanges and retail fintechs that “own relationships with users,” leaving independent infrastructure “upstream” against convenience and branding.
Wilhelm said he hopes Botanix’s shutdown “will certainly be considered by others,” and described the process as a professionally managed experiment whose conclusions should be taken seriously by other BTCFi developers.
Bitcoiners, DeFi and wrapped BTC
While estimates vary, only a tiny fraction of Bitcoin’s supply is currently in production in DeFi, and most of that is in wrapped BTC products on Ethereum and its L2, such as Base and Arbitrum, as well as Polygon, Solana, and BNB Smart Chain. A smaller percentage is on “Bitcoin L2” chains, with Bitcoin-aligned L2 and sidechains making up a modest portion of this activity in terms of value.
Tokenized BTC products themselves represent only a fraction of the assets: May 2026 analysis estimated that approximately $20 billion worth of BTC – less than 2% of the total Bitcoin supply – circulates on EVM chains in wrapped form.
Total Value Locked (TVL) in Bitcoin DeFi. Source: DeFiLlama
GoMining from October 2025 questionnaire of 730 Bitcoin holders said that 77% of respondents had never used the BTCFi platform, and only 3% had integrated BTCFi into their overall Bitcoin strategy.
Even accounting for sampling error (these respondents were connected BTC holders responding to surveys), the numbers show that BTCFi platforms that keep users in Bitcoin-specific stacks remain a niche rather than a mass market activity.
Justin d’Anethan, head of research at private cryptocurrency consultancy Arctic Digital, told Cointelegraph: “With EVM or SVM there is more liquidity and better returns [Solana Virtual Machine] native solutions than BTC solutions, period.”
When customers ask about “leveraging their Bitcoin,” practical routes, he said, are still centralized offices, exchanges lending BTC at 2% to 4% interest, basic trading structures “à la Ethena,” or institutional lending pools like Maple.
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He said a big hurdle for most Bitcoiners is the risk of switching to the less secure Bitcoin L2. In the case of “hardcore BTC maxi”, the default solution remains cold storage, HODLing and constant price increases, rather than trying to “exploit 2-3% counterparty risk”.
Native BTCFi as a structural mismatch
Dragosch said Botanix’s failure suggests that demand for standalone Bitcoin DeFi execution layers has been much weaker than their supporters expected.
He argued that capital that “really wants yield has moved to packaging BTC on mature, liquid platforms rather than coming together in tailored federations.”
From this point of view, the problem is not just that Bitcoin users have not yet “discovered” native DeFi; it’s that the architecture and user base are mismatched. Bitcoin’s base layer is slow, conservative, and firmly anchored in the store of value narrative.
“Bitcoin as a reserve hedge is a sustainable trade,” Dr. Dragosch said. “The next stage of adoption is through institutions and balance sheets, not necessarily through the execution layers of the supply chain.”
77% of respondents have never used the BTCFi platform. Source: GoMining
Who is still building BTCFi and for whom?
Diego Gutierrez Zaldivar, CEO of RootstockLabs, a Bitcoin-backed and EVM-compatible sidechain, doesn’t buy the idea that there is “no demand” for Bitcoin-based lending, income products, or broader BTCFi services.
He said the main limitation is trust: putting in place the operational, legal and risk management frameworks needed by institutions.
He said that more than 40% of all Bitcoin DeFi activity now takes place through Rootstock, including real-world asset settlements and institutional treasuries. Over the past year, he said, funds have begun asking for a one-time deposit of hundreds or even thousands of BTC into Rootstock-based products; flows that were almost unheard of two or three years ago.
TVL chains. Source: DeFiLlama
Orkun Mahir Kılıç, co-founder of Chainway Labs who is behind Citrea, a Bitcoin-anchored rollup combining the Bitcoin Virtual Machine (BVM) and zero-knowledge proofs, argued that cloning DeFi’s EVM primitives onto Bitcoin is a dead end and said Botanix’s experience is a verdict on this model, not BTCFi itself.
Orkun Mahir Kılıç is the co-founder of Chainway Labs, the power behind Citrea, a Bitcoin-anchored rollup that keeps users’ assets within the security of Bitcoin and validates its status using zero-knowledge proofs. He argued that cloning DeFi’s EVM primitives onto Bitcoin is a dead end and stated that Botanix’s experience is a verdict on this model, not BTCFi itself.
He told Cointelegraph that “safer” doesn’t change most people’s behavior.
“People don’t price in counterparty risk until something breaks,” he said. “Where It Matters” is intended for institutions and large asset holders who need transactions with minimal trust and no custodian to fail.
“For everyone else, the reason for coming here isn’t for an abstract guarantee of security; it’s for applications that don’t exist elsewhere.”
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