sBTC DeFi Playbook: Take Advantage of Stacks' BTCFi Asset
sBTC Cap-2 goes live on February 25, 2025.
Guest Post by Bitcoin DeFi Expert TheAdvisor.btc on February 16, 2025
Stacks, the leading Bitcoin L2 by market cap, is unlocking new opportunities for Bitcoin holders with the next phase of sBTC, the decentralized way to move your BTC to the L2. On February 25, the cap will increase from 1,000 BTC to 3,000 BTC, allowing more users to get their hands on sBTC, as well as enroll for the sBTC incentive program to earn up to 5% APY in real Bitcoin rewards simply by holding sBTC. The program reopens for new entries, and those who pre-register (here) will be the first to receive a notification.
Beyond earning a safe, real Bitcoin yield, sBTC can be deployed in Stacks’ growing DeFi ecosystem, opening up even more yield opportunities. Supply sBTC on Zest, pool it on Velar, or use other battle-tested DeFi apps to earn additional token rewards on top of the base APY.
This sBTC DeFi Playbook will guide you through the best ways to maximize your Bitcoin using Stacks' thriving ecosystem. Whether you're new to Stacks or a seasoned DeFi user, this playbook will help you take full advantage of Bitcoin DeFi.
Disclaimer: This playbook is for informational and educational purposes only and does not constitute financial advice. Do your own research and assess the risks before engaging with any DeFi protocol.
Beyond earning a safe, real Bitcoin yield, sBTC can be deployed in Stacks’ growing DeFi ecosystem, opening up even more yield opportunities. Supply sBTC on Zest, pool it on Velar, or use other battle-tested DeFi apps to earn additional token rewards on top of the base APY.
This sBTC DeFi Playbook will guide you through the best ways to maximize your Bitcoin using Stacks' thriving ecosystem. Whether you're new to Stacks or a seasoned DeFi user, this playbook will help you take full advantage of Bitcoin DeFi.
Disclaimer: This playbook is for informational and educational purposes only and does not constitute financial advice. Do your own research and assess the risks before engaging with any DeFi protocol.
Before you scroll down, I made it a little easier for you to decide where you want to start in this DeFi Playbook.
Starting from scratch? Start at step one! Do you already hold sBTC and STX? Start at step 5 to explore the DeFi ecosystem, its incentive programs, and more!
Starting from scratch? Start at step one! Do you already hold sBTC and STX? Start at step 5 to explore the DeFi ecosystem, its incentive programs, and more!
1. Getting Started with Your Bitcoin L2 Wallet
2. Bridging BTC to sBTC
3. Registering for the sBTC Incentive Program
4. Acquiring STX & Converting Assets to sBTC, BTC, or STX
5. Exploring DeFi Applications with sBTC
6. Exciting Incentive Programs & Yield Currently Running For sBTC
7. sBTC DeFi Tutorials
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1. Getting Started with Your Bitcoin L2 Wallet
1.1 Why You Need a Wallet
To engage with the leading Bitcoin L2s, you'll need wallets that support both Bitcoin and the Stacks ecosystem. Currently, the two primary options are Xverse and Leathers. These wallets allow users to manage BTC, sBTC, STX, and Stacks/Bitcoin tokens while seamlessly interacting with Bitcoin dApps. Here is how you can get started.
1.2 Installing Leather or Xverse Wallet
Step-by-step for Leather (web only)
1. Download the wallet extension from the official website.
2. Set up your wallet (create or import seed phrase).
3. Secure your recovery phrase and complete the setup.
Step-by-step for Xverse (web & mobile)
1. Install Xverse via App Store/Play Store or Chrome extension.
2. Set up your wallet (create or import seed phrase).
Funding Your Wallet
1. Deposit BTC into your wallet to bridge it to sBTC.
2. If needed, acquire STX and deposit it in the wallet for transaction fees.
To engage with the leading Bitcoin L2s, you'll need wallets that support both Bitcoin and the Stacks ecosystem. Currently, the two primary options are Xverse and Leathers. These wallets allow users to manage BTC, sBTC, STX, and Stacks/Bitcoin tokens while seamlessly interacting with Bitcoin dApps. Here is how you can get started.
1.2 Installing Leather or Xverse Wallet
Step-by-step for Leather (web only)
1. Download the wallet extension from the official website.
2. Set up your wallet (create or import seed phrase).
3. Secure your recovery phrase and complete the setup.
Step-by-step for Xverse (web & mobile)
1. Install Xverse via App Store/Play Store or Chrome extension.
2. Set up your wallet (create or import seed phrase).
Funding Your Wallet
1. Deposit BTC into your wallet to bridge it to sBTC.
2. If needed, acquire STX and deposit it in the wallet for transaction fees.
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2. Bridging BTC to sBTC
2.1 Overview of the sBTC Bridge
Why is moving BTC to Stacks' L2 BTC (sBTC) necessary?
Bitcoin’s programmability limitations and slow block times make it challenging to build directly on the Bitcoin Layer 1 (L1). Bitcoin Layer 2 (L2) solutions like Stacks address these challenges by leveraging Bitcoin's security (Stacks inherits 100% of Bitcoin’s finality) while enabling faster transactions and scalable applications.
What is sBTC?
sBTC is a 1:1 BTC-backed asset on Stacks, secured by Bitcoin. It unlocks the ability to leverage over $1 trillion of BTC capital for DeFi and dApps.
sBTC has already gained trust, with over 1,000 BTC deployed in just three days since launch, reaching its initial cap and proving itself as a secure and reliable asset.
2.2 Using the sBTC Bridge on app.stacks.co
Why is moving BTC to Stacks' L2 BTC (sBTC) necessary?
Bitcoin’s programmability limitations and slow block times make it challenging to build directly on the Bitcoin Layer 1 (L1). Bitcoin Layer 2 (L2) solutions like Stacks address these challenges by leveraging Bitcoin's security (Stacks inherits 100% of Bitcoin’s finality) while enabling faster transactions and scalable applications.
What is sBTC?
sBTC is a 1:1 BTC-backed asset on Stacks, secured by Bitcoin. It unlocks the ability to leverage over $1 trillion of BTC capital for DeFi and dApps.
sBTC has already gained trust, with over 1,000 BTC deployed in just three days since launch, reaching its initial cap and proving itself as a secure and reliable asset.
2.2 Using the sBTC Bridge on app.stacks.co
- Access the sBTC bridge interface by heading over to https://app.stacks.co/.
- Connect your wallet (Leather/Xverse).
- Follow the steps to peg in BTC and receive sBTC in your wallet. Mainly, select the amount of BTC you want to deposit and confirm the transaction.
2.3 Key Tips for Bridging
2.4 Audits and Security
The sBTC bridge has undergone extensive audits by leading security firms:
1. Asymmetric Research: Known for their rigorous research and protocol audits, Asymmetric brings security expertise to sBTC to identify and mitigate potential vulnerabilities.
2. ImmuneFi: A robust bug bounty program incentivizes ethical hackers to uncover and address potential issues, adding an additional layer of defense.
3. 3rd Party Audits: Independent audit reports will be completed for additional security reviews, ensuring the protocol is thoroughly vetted by external experts.
- Double-check wallet addresses.
- Understand fees and finality times (BTC mainnet confirmations).
2.4 Audits and Security
The sBTC bridge has undergone extensive audits by leading security firms:
1. Asymmetric Research: Known for their rigorous research and protocol audits, Asymmetric brings security expertise to sBTC to identify and mitigate potential vulnerabilities.
2. ImmuneFi: A robust bug bounty program incentivizes ethical hackers to uncover and address potential issues, adding an additional layer of defense.
3. 3rd Party Audits: Independent audit reports will be completed for additional security reviews, ensuring the protocol is thoroughly vetted by external experts.
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3. Registering for the sBTC Incentive Program
3.1 sBTC Incentive Program - Website
The reward program allows users to earn an estimated 5% APY, paid in sBTC every two weeks, for holding sBTC.
Where do the rewards come from?
The program is fueled by a group of Stackers who "stack" their STX to a designated reward address, contributing their earned BTC rewards to the initiative.
The reward program allows users to earn an estimated 5% APY, paid in sBTC every two weeks, for holding sBTC.
Where do the rewards come from?
The program is fueled by a group of Stackers who "stack" their STX to a designated reward address, contributing their earned BTC rewards to the initiative.
This program aims to increase sBTC liquidity and promote early adoption of the protocol. Unlike solutions like Babylon, which currently offer no active BTC yield, Stacks and sBTC provide an attractive opportunity to earn rewards on BTC while exploring additional possibilities within DeFi.
3.2 Steps to Participate
3.2 Steps to Participate
- Visit bitcoinismore.org.
- Connect wallet (make sure to have BTC pegged to sBTC) and register the wallet .
- Track your rewards and explore bonus incentives through partner protocols.
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4. Acquiring STX & Converting Assets to sBTC, BTC, or STX
4.1 Why You Need STX
STX is the native token of the Stacks ecosystem, used to pay transaction fees on the network. It also plays a key role in the Stacks consensus mechanism, where miners commit BTC to compete for Stacks blocks and earn newly minted STX rewards along with transaction fees. Meanwhile, STX holders who participate in stacking receive the BTC committed by miners.
STX is the native token of the Stacks ecosystem, used to pay transaction fees on the network. It also plays a key role in the Stacks consensus mechanism, where miners commit BTC to compete for Stacks blocks and earn newly minted STX rewards along with transaction fees. Meanwhile, STX holders who participate in stacking receive the BTC committed by miners.
The DeFi ecosystem has already unlocked significant STX liquidity, helping various DeFi protocols attract users and liquidity while positioning them for sBTC.
4.2 Where to Buy STX
STX can be bought on various Centralized Exchanges (e.g Coinbase Binance, KuCoin, OKX). Find whole list here.
4.3 Swapping BTC to STX on DEXs
Use BTC, sBTC or other Stacks token to swap for STX directly on supported DeFi platforms. (ALEX, Bitflow and Velar DEXs) - STX needed to pay for gas fees in this scenario.
4.4 Converting Other Assets to sBTC or BTC
In addition to pegging BTC (as detailed in Section 2) or purchasing STX on centralized exchanges (as detailed in Section 4) and swapping it for sBTC, there are other options available for exchanging Stacks assets.
For intance, users can alread:
4.5 Why Diversify into sBTC
sBTC presents a unique opportunity to leverage Bitcoin’s security and Stacks' fast transactions, enabling more productive use of BTC holdings and the potential to earn yield through the sBTC rewards program and Stacks DeFi protocols.
With 1,000 BTC already deployed, demonstrating its appeal to both retail and institutional users, sBTC offers a trusted solution for accessing Bitcoin DeFi.
4.2 Where to Buy STX
STX can be bought on various Centralized Exchanges (e.g Coinbase Binance, KuCoin, OKX). Find whole list here.
4.3 Swapping BTC to STX on DEXs
Use BTC, sBTC or other Stacks token to swap for STX directly on supported DeFi platforms. (ALEX, Bitflow and Velar DEXs) - STX needed to pay for gas fees in this scenario.
4.4 Converting Other Assets to sBTC or BTC
In addition to pegging BTC (as detailed in Section 2) or purchasing STX on centralized exchanges (as detailed in Section 4) and swapping it for sBTC, there are other options available for exchanging Stacks assets.
For intance, users can alread:
- Swap native BTC for STX on Bitflow
- Xlink, a cross-chain bridge connecting Stacks to other ecosystems, allows users to bridge assets like stablecoins to Stacks or swap other assets for STX
4.5 Why Diversify into sBTC
sBTC presents a unique opportunity to leverage Bitcoin’s security and Stacks' fast transactions, enabling more productive use of BTC holdings and the potential to earn yield through the sBTC rewards program and Stacks DeFi protocols.
With 1,000 BTC already deployed, demonstrating its appeal to both retail and institutional users, sBTC offers a trusted solution for accessing Bitcoin DeFi.
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5. Exploring DeFi Applications with sBTC
Zest
The Bitcoin lending/borrowing protocol on Stacks. Zest enables users to put their BTC to work to earn more BTC, or borrow against your BTC (all via sBTC). Currently, users can deposit sBTC to earn yield or borrow assets using sBTC as collateral. Borrowing sBTC will be available soon.
Velar
Velar is a DeFi liquidity protocol offering two core products: a live DEX and a Perpetual Decentralized Exchange (Perp DEX), launching soon.
The Velar DEX allows users to swap Stacks tokens and provide liquidity to pools, earning rewards from swap fees and VELAR tokens. The Perp DEX is set to go live on Stacks in early March.
ALEX
AMMs, liquidity mining, and yield optimization protocol. ALEX DEX allows users to swap Stacks tokens and provide liquidity to pools, earning rewards from swap fees and additional rewards thanks to their current Surge campaign.
Bitflow
The Bitcoin DEX aggregator. Bitflow's primary product is a DEX that finds the best swap rates across multiple DEXs and liquidity pools. Users can provide liquidity with sBTC, STX, and other assets to earn yield from swap fees.
Additionally, Bitflow has introduced a Runes AMM that leverages Stacks in the background to scale Runes trading, addressing the limitations of Bitcoin Mainnet constraints.
Granite
The lending protocol enables users to use their BTC (in the form of sBTC) as collateral to borrow stablecoins. The key features of Granite are 1) No Rehypothecation, 2) Soft Liquidations, 3) Offline Position Tracking.
Stacking DAO
A restaking protocol for STX. Its flagship solution, the stSTXbtc liquid stacking token, allows users to earn sBTC yield from stacking every two weeks, directly in their wallets. Additionally, stSTXbtc can be used in DeFi protocols like Zest for further utility.
Hermetica
Hermetica's USDh on Stacks is the the first Bitcoin-backed, yield-bearing synthetic dollar outside the fiat system. You can use your sBTC as collateral to borrow USDh and stake it for up to 25% APY.
The Bitcoin lending/borrowing protocol on Stacks. Zest enables users to put their BTC to work to earn more BTC, or borrow against your BTC (all via sBTC). Currently, users can deposit sBTC to earn yield or borrow assets using sBTC as collateral. Borrowing sBTC will be available soon.
- Current stage: Mainnet - 60M+ TVL
- Funding status: Backed by prominent investors such as Draper Associates (by Tim Draper), Binance Labs, Bitcoin Frontier Fund, raised $3.5M
- Token plans: No token yet, but future incentives possible - points program live
Velar
Velar is a DeFi liquidity protocol offering two core products: a live DEX and a Perpetual Decentralized Exchange (Perp DEX), launching soon.
The Velar DEX allows users to swap Stacks tokens and provide liquidity to pools, earning rewards from swap fees and VELAR tokens. The Perp DEX is set to go live on Stacks in early March.
- Current stage: DEX on mainnet while Perpetual DEX launching soon (testnet phase) - 3.5M+ TVL
- Funding: Secured $3.5M in funding backed by CMS, Black Edge Capital and many others.
- Token: VELAR token launched on Bybit
ALEX
AMMs, liquidity mining, and yield optimization protocol. ALEX DEX allows users to swap Stacks tokens and provide liquidity to pools, earning rewards from swap fees and additional rewards thanks to their current Surge campaign.
- Current stage: Fully operational with live liquidity pools - 20M+ TVL
- Funding: Secured $10M in latest funding round led by Spartan Capital.
- Token: $ALEX token with staking and governance features.
Bitflow
The Bitcoin DEX aggregator. Bitflow's primary product is a DEX that finds the best swap rates across multiple DEXs and liquidity pools. Users can provide liquidity with sBTC, STX, and other assets to earn yield from swap fees.
Additionally, Bitflow has introduced a Runes AMM that leverages Stacks in the background to scale Runes trading, addressing the limitations of Bitcoin Mainnet constraints.
- Current stage: Mainnet + Runes AMM live - 8M+ TVL
- Funding: Backed by prominent investors such as Portal Ventures, Newman Capital and Bitcoin Frontier Fund. $1.3M in pre-seed funding.
- Token Plans: No token yet, but future incentives possible - points program live.
Granite
The lending protocol enables users to use their BTC (in the form of sBTC) as collateral to borrow stablecoins. The key features of Granite are 1) No Rehypothecation, 2) Soft Liquidations, 3) Offline Position Tracking.
- Current stage: beta app live on mainnet. Register to enter beta.
- Funding: backed by Trust Machines.
- Token Plans: No token yet, but future incentives possible - points program not live.
Stacking DAO
A restaking protocol for STX. Its flagship solution, the stSTXbtc liquid stacking token, allows users to earn sBTC yield from stacking every two weeks, directly in their wallets. Additionally, stSTXbtc can be used in DeFi protocols like Zest for further utility.
- Current stage: Mainnet - 50M+ TVL
- Funding: No public announcement yet - started with a Stacks Foundation grant
- Token Plans: No token yet, but future incentives possible - points program live
Hermetica
Hermetica's USDh on Stacks is the the first Bitcoin-backed, yield-bearing synthetic dollar outside the fiat system. You can use your sBTC as collateral to borrow USDh and stake it for up to 25% APY.
- Current stage: Mainnet
- Funding: Backed by prominent investors such as CMS and Newman Capital. Raised $1,3M in seed round.
- Token Plans: No token yet, but future incentives possible - points program live
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6. Exciting DeFi Programs & Yield Currently Running For sBTC
- ALEX Surge Program: Stacks & Bitcoin DEX ALEX is currently running a 12,000,000 in ALEX incentive program for various DEX pools that allow you to earn extra ALEX token rewards.
- Velar sBTC Pool: You can currently earn a % in sBTC yield, as well as a proportion of 5K in VELAR rewards for providing liquidity to the STX-sBTC pool.
- Bitflow sBTC Pool: You can currently earn 22 - 500% in APY for the sBTC / STX pool. This, as well as additional points rewards.
- Zest Supply sBTC: You can supply sBTC and earn 1-2% APY extra in Bitcoin rewards on top of the sBTC incentive program.
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7. DeFi Tutorials
7.1. Supply sBTC on Zest for addition sBTC Rewards
- Visit Zest Protocol website and click on the “Launch App” button
- Click on “Connect Wallet” in the top right corner & select/connect your Stacks wallet.
In the Stacks Market section, head over to the “Asset to Supply” box and click on the “Supply” button of the sBTC row
Make sure to already have some sBTC (if not check section 2 to learn how to acquire some) and decide the amount of sBTC to supply. Then click on Supply button and confirm the transaction to start earning yield on sBTC.
Check out the step-by step video tutorial here.
7.2. Deposit sBTC on a DEX and escrow LP to earn sBTC Rewards
Note: I have used Bitflow for this. The process is very similar on ALEX or VELAR. Both have native token rewards for pooling sBTC, so you should definitely check out all three options first before deciding which to use.
- Visit Bitflow DEX website and click on the “Launch App” button
- Click on the “Wallet manager” button on the top right corner, and connect on the Stacks chain with one of your wallets
- Next step is to click on the Pool section
- Select the sBTC/STX pool (or any sBTC/token pair you prefer as long as you own the second asset) and click on the row.
- Now decide the amount of liquidity you want to provide. NOTE: you will need to provide the same amount of liquidity for both assets (e.g $100 worth of STX and sBTC). There is no single-sided liquidity option yet. Then proceed with confirming the transaction to provide liquidity and receive the LP tokens back (token representing your share of liquidity inside Bitflow sBTC/STX pool in this case)
- Then you can stake your LP Tokens to earn additional rewards on top of the trading fees. Head over to the earn section.
- Select and click the sBTC/STX row and scroll to the Stake box. There decide how much of your LP tokens you want to stake and for how many cycles. Than confirm your transaction.
- Right above the Stake box you can find your position and rewards cycle box to track earnings and LPs.
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