Starknet introduces bitcoin staking and yield product in BTCFi expansion

Bitcoin staking has gone live on Starknet, which the project describes as the first trustless way BTC can be staked on a Layer 2. Holders can earn rewards while keeping custody of their assets and helping secure the network's consensus process — a move Starknet has branded the "bitcoin strategy for OGs."

The mechanism does not alter Bitcoin's base layer, which uses a proof-of-work consensus mechanism and does not support staking natively. Instead, Starknet's initiative relies on wrapped versions of BTC — such as WBTC, tBTC, Liquid Bitcoin, and SolvBTC — that can be delegated on Starknet. These assets can also now participate in Starknet's consensus alongside STRK following an onchain vote in August. On Starknet, these tokenized holdings are secured by zk-STARK cryptography, which provides post-quantum security with a track record in production.

"Last year, I said Starknet would unleash Bitcoin's power. Today we're making good on that promise … bringing value to bitcoin holders with no loss in trust," StarkWare CEO and co-founder Eli Ben-Sasson said in a statement. "For me, it's two dreams converging. The ZK-tech that I willed into existence, merging with Satoshi's vision that you own your life now you get real yield, real consensus powered by your own bitcoin."

"There's a real beauty to the idea of bitcoin, the coin of the first blockchain, helping to secure another decentralized network that is delivering blockchain ethos and functionality to new areas of life," Ben-Sasson told The Block. "I believe Satoshi would be proud."

100 million STRK incentive

In parallel, the Starknet Foundation is allocating 100 million STRK ($12 million) to boost the BTCFi ecosystem on Starknet. This includes incentivizing borrowing against BTC, aiming to make Starknet the most cost-effective venue for using bitcoin as collateral and fueling yield strategies. "Bitcoin is the best form of collateral. Everyone from Saylor to Wall Street now realizes this, but I want you to be able to borrow against it and then invest what you're borrowing," Ben-Sasson said.

Furthermore, digital asset investment firm Re7 Capital announced plans on Tuesday to roll out a new BTC-denominated yield product on Starknet in October. The strategy is designed to generate returns directly in bitcoin through a combination of off-chain derivatives trading, curated DeFi yield strategies, and participation in BTC staking on Starknet. While structured to meet institutional standards, the fund will also be available in a tokenized format, making it accessible beyond professional investors.

Re7 founder and CIO Evgeny Gokhberg said the strategy aims to compound BTC holdings sustainably and securely, while also contributing to Starknet's security. "When an investment firm with a strong onchain track record of Re7's calibre brings its bitcoin product to Starknet, it’s a clear declaration of the network's great promise," Ben-Sasson added.

Together, the BTC staking mechanism, STRK incentives program, and the upcoming Re7 product represent the first wave of planned "BTCFi" initiatives on Starknet. They mark a shift in focus for the Layer 2 network since June 2024, when Starknet first outlined plans to expand beyond Ethereum and incorporate Bitcoin into its long-term roadmap with the ultimate goal of becoming Bitcoin's execution layer.

"I ask people whether they feel that bitcoin has unlocked freedom for them? Maybe it made you rich, good for you. But do you feel and do you see around you the freedom that bitcoin has unlocked, and the answer is no. There's a flaw. There's a problem... it lacks the scale needed for us to transact freely... If each one of us would like to buy their daily cup of coffee with bitcoin, we know this is impossible due to the scale limitations," Ben-Sasson told The Block. "We need to fix scale. And we also need to enable BTC holders to get their coins working for them. And we need to make bitcoin useful for everyone everyday. Today's announcements are pushing forward on all of that."