Bitcoin DeFi’s Triumph: Builders Predict Unseating Traditional Finance
Get ready for a financial revolution. At the recent Bitcoin 2025 conference, leading builders shared a bold vision: Bitcoin DeFi is set to move beyond just being a store of value and directly challenge the dominance of traditional finance. This isn’t just speculation; it’s a roadmap for turning Bitcoin into a dynamic, active financial instrument powered by its fundamental security.
Why Bitcoin DeFi is Poised to Challenge Traditional Finance
For years, Bitcoin has been hailed as digital gold – a secure, censorship-resistant store of value. While incredibly important, this passive role is evolving. The growing movement around decentralized finance (DeFi) on Bitcoin aims to leverage its robust foundation for a parallel financial system.
Speakers at Bitcoin 2025 emphasized that Bitcoin’s infrastructure is the ideal bedrock for the next generation of DeFi applications. Projects like the Liquid Network and others are expanding the ‘tech set’ within the Bitcoin ecosystem, advocating for broader use cases beyond simple holding.
Turning Bitcoin into an Active Financial Instrument
The core premise driving Bitcoin DeFi is simple: Bitcoin is too significant to remain passive. Developers are building trustless, permissionless systems around BTC, enabling it to be used actively.
Jacob Phillips, co-founder of Lombard Finance, highlighted this shift. His protocol, Lombard’s LBTC, allows users to stake Bitcoin on the Babylon blockchain for yield. This staked token can then be used in various DeFi applications like lending and trading, extending Bitcoin’s utility far beyond its native network.
Building on Bitcoin’s Foundation: Layer 2s and Smart Contracts
Adrián Eidelman, co-founder and CTO of RootstockLabs, championed Bitcoin’s Layer 2 (L2) solutions as crucial for smart contracts and financial inclusivity. He stated there’s no better foundation than Bitcoin for a new financial system. Rootstock’s RKS merged mining reached an all-time high in Q1 2025, demonstrating the growth in sidechains and federated bridges that enhance Bitcoin’s functionality without compromising its core security.
Charlie Hu, co-founder of Bitlayer, stressed the importance of finality and self-sovereignty. He outlined a path that uses the Bitcoin base layer for security and finality, integrating new DeFi infrastructure directly or via secure layers, rather than relying solely on less secure sidechains.
Real Yield and Better Rates Outcompeting Traditional Finance
Adam Back, CEO of Blockstream, pointed to the potential for Bitcoin DeFi solutions to provide yield directly. He explained that with a Bitcoin layer 2, users can stake their Bitcoin and get instant yield, a fundamentally different model from traditional ETFs. Back predicted that Bitcoin-native applications will offer superior borrowing rates and liquidity compared to TradFi.
He argued that the most liquid markets will eventually be onchain, leading to the best financial rates being found there. This decentralized design encourages users towards trustless systems, self-custody tools like hardware wallets, and layer-2 staking yields, which offer lower fees and greater privacy than custodial options.
The Bedrock of Self-Sovereignty and Real-World Impact
Self-custody was a recurring theme. Yves La Rose, CEO of Vaulta, called it the bedrock of Bitcoin DeFi, emphasizing that user control remains non-negotiable even as new financial layers are built. Joseph Kelly, co-founder and CEO of Unchained, highlighted collaborative custody as an alternative to traditional finance’s intermediaries. Clients holding two of three keys in their multisig vaults ensures they retain unilateral control over funds.
Rich Rines, an initial contributor at Core DAO, framed this moment as a convergence of robust security and DeFi experimentation. While Bitcoin is a store of value today, he sees utility as the next major wave.
RootstockLabs’ Eidelman sees Bitcoin DeFi as a powerful tool for economic empowerment, particularly in regions facing inflation and capital controls. He cited examples like Argentina, where dollar-backed stablecoins are used to escape local currency erosion, with Bitcoin often serving as the underlying collateral. This real-world adoption is driving the movement.
The Future is Decentralized
From the conference stage to the developers building the infrastructure, there’s a clear conviction: Bitcoin is much more than just digital gold. It’s the foundation for a new financial era. The rise of decentralized finance on Bitcoin promises to unlock new utility, empower users with self-sovereignty, and ultimately challenge the established order of traditional finance.
