BTCFi Alpha File #08: August 23 BTCFi is not a single-protocol story. It’s an ecosystem story; execution layers, credit markets, and security models competing to become the rails for Bitcoin yield. For fifteen years, Bitcoin was the end of the road. You bought it, you held it, maybe you moved it. BTCFi already changing that. Now, it asks: What rails will turn $BTC into productive collateral? From where I’m sitting, three ecosystems stand out right now: Babylon, Stacks, and Rootstock. But these aren’t interchangeable. Each carries a distinct philosophy: -> One is turning $BTC itself into the security budget of other networks. -> One is building an application layer where users interact with $BTC natively. -> One is extending Ethereum’s DeFi design onto Bitcoin rails. Before you choose winners, you need to understand how different these models really are. ↓ 1️⃣ Babylon (@babylonlabs_io) Babylon is arguably the most important conceptual shift in BTCFi. Instead of building another app layer, it asks: “What if $BTC could be pledged directly as economic security for other networks?” • $BTC Staking: Users delegate $BTC to validators securing external chains. Misbehavior = slashable $BTC. • Restaking for AVSs: Just like EigenLayer, but with Bitcoin. AVSs (Actively Validated Services) can rent Bitcoin’s trust base. • Yield for idle $BTC: Instead of sitting cold, $BTC earns from providing cryptoeconomic security; a new fixed-income primitive. Babylon’s angle? It’s not DeFi apps. It’s Bitcoin as collateral for the entire multichain world. 2️⃣ Stacks (@Stacks) Stacks is the most visible BTCFi ecosystem because it behaves like Ethereum circa 2019: an app layer anchored to Bitcoin. - ALEX: the DeFi hub for Stacks. It runs AMMs, lending, perps, and structured products. Think of it as the Curve + Aave of BTCFi. - Zest Protocol: institutional-grade $BTC credit pools. Lenders supply $BTC, counterparties borrow against it, with emphasis on compliance and risk filters. - Bitflow: a DEX aggregator purpose-built for Bitcoin DeFi. By routing trades across Stacks protocols like ALEX, Arkadiko, and Velar, it guarantees users the best swap rates. It also supports stablecoin trading with lower slippage and real BTC yield opportunities. Stacks’ pitch? Build the user-facing BTCFi apps that abstract away custody complexity and deliver a familiar DeFi experience that's all anchored to Bitcoin finality. 3️⃣ Rootstock (@rootstock_io) Rootstock has been live since 2018, making it the veteran of BTCFi. It’s EVM-compatible, which means developers can port Ethereum DeFi infrastructure directly. - Sovryn: the flagship. A full DeFi suite with lending, and margin trading, all BTC-settled. It’s already processed billions in volume. - Tropykus: an emerging lending protocol focused on LatAm markets, bringing localized adoption on Rootstock rails. - Stablecoin issuance: RSK’s role as an RWA and stablecoin layer makes it a bridge for $BTC-backed stable liquidity. Rootstock’s edge? It doesn’t need to reinvent DeFi. It reuses EVM tooling but aligns it to $BTC collateral and security.