BTCFi Disruptor Stacks: From Technological Breakthrough to Application Expansion, Creating the Bitcoin Version of "Solana"

Author: momo, ChainCatcher

To unlock trillions of dollars in dormant liquidity from Bitcoin, Bitcoin Layer 2 solutions have experienced explosive growth over the past two years. After a market reshuffle, speculators have gradually exited, but the established Bitcoin Layer 2 project Stacks has stood the test of time, steadily growing towards 2025.

Recently, with the completion of the third phase of the sBTC deposit plan, the amount of BTC deposited for minting sBTC on the Stacks network surged from over 1,000 to over 5,000, and the total locked value (TVL) of sBTC surpassed $580 million. At the same time, the market capitalization of stablecoins on Stacks has increased nearly sevenfold, with the total amount of STX staked reaching a historic high of 608 million.

The BTCFi (Bitcoin Finance) ecosystem of Stacks is also continuously expanding, attracting a variety of applications covering lending, decentralized exchanges (DEX), NFTs, social networks, and more. From an initial scaling solution, Stacks is evolving into a full-stack ecosystem, comprehensively expanding Bitcoin's utility.

BTCFi May Be Approaching a Turning Point

As the hype around Bitcoin Layer 2 subsides, the market's demand for BTCFi (Bitcoin Finance) was once questioned. However, trends for 2025 and the growing institutional interest indicate that this demand is continuing to rise.

Since the approval of Bitcoin spot ETFs in 2024, institutional holdings have rapidly increased. According to Coinbase data, as of June 2025, there are 228 publicly listed companies globally holding over 820,000 BTC. MicroStrategy's "Bitcoin treasury" model has set a trend, with more companies viewing Bitcoin as a strategic asset.

At the government level, Texas has initiated state-level Bitcoin reserves; Hong Kong, Japan, South Korea, Vietnam, and Thailand are also exploring legal frameworks to facilitate institutional entry.

However, when institutions hold large amounts of BTC, traditional financial tools struggle with liquidity management, risk hedging, capital efficiency improvement, and compliance. At this point, BTCFi applications—such as derivatives, staking, and yield protocols—become essential.

For retail investors, as Bitcoin becomes mainstream, they no longer view it merely as a speculative asset but as a long-term reserve asset, hoping to generate yields from BTC as well.

However, past Bitcoin Layer 2 solutions faced several core bottlenecks:

• Low yields: Significantly lower than the DeFi ecosystems of Ethereum and Solana, lacking attractiveness.

• Centralization risks: Some rely on custodial bridges or centralized validators, contradicting Bitcoin's decentralized spirit.

• Security concerns: Cross-chain bridges have been hacked multiple times (e.g., the WBTC incident), undermining user trust.

• Poor user experience: Complex processes and high costs hinder retail adoption.

Since its launch in 2018, Stacks has also faced these challenges, but through multiple upgrades—especially the Nakamoto upgrade in 2024 and the introduction of trustless sBTC—it has effectively addressed the aforementioned pain points and stands at a critical juncture for the potential explosion of BTCFi.

With technological breakthroughs from projects like Stacks, institutions remain optimistic about the prospects of BTCFi in 2025. VanEck predicts that the market size of Bitcoin Layer 2 will triple compared to 2024. Aspen Digital's annual report for 2025 forecasts that the total locked size of BTCFi could exceed $20 billion, with significant contributions from ecosystems like Stacks.

Nakamoto Upgrade: Making Stacks a True Bitcoin Layer 2

The Nakamoto upgrade has truly transformed Stacks into a Layer 2 network for Bitcoin. It addresses past limitations in scalability, security, and integration with the Bitcoin mainnet through a series of technological innovations, laying the groundwork for sBTC and trustless Bitcoin cross-chain solutions.

Since its founding in 2017, Stacks' goal has been to introduce smart contracts to Bitcoin without modifying the Bitcoin mainnet. In 2021, Stacks 2.0 launched the PoX (Proof of Transfer) mechanism to inherit Bitcoin's decentralization, but the 1:1 matching with Bitcoin