BTC Monetization Lags at 1.5%, Stacking Protocols Fill the Gap

Monetization of Bitcoin (BTC) has been limited to just 1.5% of its total active supply, according to a recent analysis by Castle Labs.

This figure remains unchanged despite BTC's market capitalization increasing to $1.582 trillion from approximately $1.3 trillion at the time of the analysis.

The study identified several paths for monetizing BTC, including centralized lending and expression assets such as WBTC, cbBTC, tBTC, LBTC, and BTC Layer 2.

However, these methods come with associated risks, such as counterparty risk and custodianship issues.

To address this challenge, Bitcoin Layer 2 and staking protocols are being developed to bridge the gap between BTC's security model and the need for DeFi functionalities.

The Stacks (STX) project is cited as a representative case of BTC native finance, with its PoX-5 hard fork upgrade enabling protocol bonds that provide BTC-denominated yields without bridges or wrapping.