While Bitcoin was created to be a peer-to-peer payments network, it has grown into more than that. Today, Bitcoin has become infrastructure to build the future of finance on–more specifically decentralized finance (DeFi)
In this article, we look at three ways you can utilize Bitcoin DeFi to earn yield on your bitcoin as an investment.
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3 Ways to Earn Yield in the Bitcoin DeFi Market
Here are three major ways to earn yield in the Bitcoin DeFi market today: staking, lending, and yield farming.
Staking
While Bitcoin doesn’t use a proof-of-stake consensus model, new Bitcoin Layer 2 solutions have created opportunities to stake BTC or Bitcoin-wrapped assets to help secure networks or validate transactions—and earn rewards in return.
Products like the Xverse, a popular gateway into the Bitcoin DeFi ecosystem, offer users a way to earn Bitcoin yield by participating in stacking—a unique staking-like mechanism native to the Stacks blockchain.
According to this guide, users can lock STX tokens (not BTC directly) to help secure the network and earn BTC rewards. This process leverages the Stacks Proof-of-Transfer (PoX) model, which connects Bitcoin’s security with Stacks’ smart contract functionality.
While users don’t stake native BTC, they’re still earning Bitcoin-denominated yield through a Bitcoin-secured mechanism, making this one of the more user-friendly and Bitcoin-aligned ways to earn staking rewards today.
Other protocols like Babylon have also introduced innovative staking models where BTC holders can stake their native assets without bridging them to another chain. In Babylon’s case, Bitcoin is used to secure Cosmos-based zones by being time-locked and slashed if validators misbehave. This lets Bitcoin holders participate in a proof-of-stake environment while still keeping their asset exposure in BTC.
Lending
Lending is one of the simplest and most accessible ways to earn income in Bitcoin DeFi. Here, you lend your BTC to other users through a decentralized protocol or custodial platform, and in return, you earn interest on your deposits.
Projects like Sovryn, built on Bitcoin’s Rootstock (RSK) Layer 2, offer decentralized lending markets where users can supply BTC and earn yield. Sovryn’s lending pools work similarly to Aave or Compound on Ethereum. You deposit BTC, others borrow it (usually overcollateralized), and you earn interest in return. Sovryn is notable for its focus on censorship-resistant infrastructure and user sovereignty.
Other platforms like Atomic Finance use native Bitcoin smart contracts to facilitate peer-to-peer lending and covered call strategies—all without ever wrapping or bridging your BTC.
Lending BTC offers a relatively low-friction way to earn yield, especially for users who prefer passive strategies. However, there’s always risk—borrower defaults, platform hacks, and limited DeFi-native infrastructure.
Yield Farming
Yield farming involves providing liquidity to pools on decentralized exchanges or protocols and earning rewards in return—often through trading fees and incentive tokens.
RSK-based platforms like RubiDEX or Sovryn allow users to provide BTC and other assets to liquidity pools. By doing so, users earn a portion of the trading fees, plus protocol incentives in native tokens like SOV. Similarly, Alex Lab on the Stacks chain offers LP farming programs where BTC-pegged assets like xBTC or sBTC can be used to earn yield. These pools typically include incentive token emissions in addition to trading fees, creating high APYs during promotional periods.
Yield farming with Bitcoin-pegged assets can unlock higher returns and access to a wide variety of DeFi protocols. The risks include impermanent loss, protocol exploits, and the complexities of bridging BTC to other chains or using synthetic versions. For those who understand the risks and can manage them well, the upside can be worth it.
Conclusion
With the rise of Bitcoin Layer 2s like Stacks, Rootstock, and Babylon, along with native DeFi platforms and smarter bridging solutions, BTC holders now have several yield-generating options that can help them reach their personal financial goals.
Regardless of the yield generation method you choose to explore, always make sure to do your own research on every platform or service you use for better decision-making.
