Author: JiaYi, co-founder of GeekCartel

I have mentioned many times before that the trillion-dollar The amount of Bitcoin is actually the largest and best “fund pool” in the crypto world.

Last month, Avalon Labs, the largest on-chain lending agreement in the Bitcoin ecosystem, has just completed a $10 million Series A financing led by Framework Ventures. The venture capital institution GeekCartel is also involved, hoping to work with Avalon and more innovative projects in the Bitcoin ecosystem to transform BTC from a digital value store into a more active financial instrument.

In fact, for the Bitcoin ecosystem, starting from Babylon and Solv, BTC, as a liquid asset and niche asset, is clearly moving towards richer assets. The structured income scenarios on the chain are derived and gradually give rise to unique and self-contained BTCFi ecosystems.

From a sustainable perspective, if we can revitalize the dormant BTC and build an efficient and secure liquidity network, we can provide a solution for the trillion-dollar industry of BTC. assets, completely opening up the global imagination space as a DeFi niche asset.

Industry practices for liberating Bitcoin liquidity

DeFiLlama data shows that as of January 9, 2025, the total locked position value on the Ethereum chain exceeded US$64 billion. A significant increase of nearly 180% compared to January 2023 (23 billion US dollars), but the Bitcoin ecosystem began to gain momentum along with the Ordinal wave during the same period, even if BTC The market value and price growth are much better than ETH, but it has never been able to catch up with the expansion speed of the ecosystem on the Ethereum chain.

You know, if BTC liquidity is released by even 10%, it will create a market of up to 180 billion US dollars. If it can reach a TVL ratio similar to ETH (on-chain TVL/total market capitalization, currently about 16%), will release about US$300 billion in liquidity.

This is enough to promote the explosive growth of the BTCFi ecosystem, and even has the potential to exceedThe EVM network will become the largest super-on-chain financial ecosystem.

From this perspective, the biggest imagination space of Avalon, a Bitcoin liquidity platform that "allows anyone to benefit from BTC lending", is also in This - so far, has become the largest lending agreement in the entire BTC ecosystem, second only to DAI and lisUSD.

This also created a record for the fastest growing TVL DeFi lending agreement in the history of DeFi. According to official data, Avalon Labs TVL has exceeded US$2 billion, and its launch The locked-up volume of Bitcoin stablecoin USDa exceeded US$500 million just one week after its launch.

For current BTC holders, the BTC assets accumulated on their hands It must be a necessity to make full use of it, but at the same time, you don’t want your BTC to bear too much risk of principal loss. It is best to exchange fixed assets for liquid and convenient operations.

Therefore, the on-chain lending protocol based on Bitcoin is destined to usher in a window of opportunity, and this is where Avalon’s opportunity lies - the interest rate for project lending is fixed at 8% , professional institutions will custody the mortgaged Bitcoins, and the loaned stablecoins will be supplied in an unlimited amount, which will give BTC holders more sufficient liquidity to participate in other projects within the ecosystem.

The logic of this gameplay has also been certified by the market. It is worth mentioning that the difference between Avalon official and other TVL project strategies is that they focus on The key point is the healthy construction of retail investors in the entire ecosystem. It is not just a game for large investors. Anyone can participate and use leverage as much as possible within a safe range to increase the rate of return.

How much is the Bitcoin stablecoin worth?

From the perspective of stablecoins, decentralized stablecoins on the chain are still dominated by Collateralized Debt Position (CDP) stablecoins - MakerDAO has the largest DAI, liUSD, USDJ And so on.

Essentially, a CDP does not look like a loan - the borrower mints a CDP, the protocol oracle calculates the dollar value at a 1:1 ratio, and the CDP can sold on the open market, whereby the borrower "borrows"Another asset where the lender receives CDP.

To put it bluntly, this is an extension to build stablecoins based on lending scenarios, which is equivalent to creating an additional liquidity trading pool for those assets that usually sleep. Taking Avalon as an example, its ecosystem currently has four core business sectors: USDa, a revenue-based stablecoin based on Bitcoin collateral; a lending protocol based on USDa; a hybrid lending platform that connects DeFi and CeFi; and supports BTC Collateralized decentralized lending protocol.

This is also the reason why stablecoin protocols and lending protocols can easily penetrate each other - for example Aave and MakerDAO, which are based on lending, are working in both directions. One is launching the native stablecoin GHO, and the other is accelerating the construction of its own lending scenario coverage.

Therefore, on the same basis, Avalon's liquidity market can build the stablecoin USDa market through liquidity design while forming the "lending" relationship of the underlying assets. , and provide users with fixed income products.

In a word, Avalon has really made it possible for anyone to benefit from BTC lending, turning Bitcoin from an idle asset into a more liquid one. This is not only It helps the Bitcoin ecosystem solve the stablecoin problem that has been troubled for a long time, and because it uses LayerZero technology to achieve cross-chain compatibility, users can also operate seamlessly in multiple DeFi ecosystems without the need for a third-party cross-chain bridge. USDa, this brings the liquidity of the Bitcoin ecosystem to other chains in disguise.

You must know that BTC is mostly idle. Since it has a sufficient safety margin compared to other counterfeit assets, many OG or Maxi have no motivation and are unwilling to take the risk of crossing it. Linked to ecosystems such as Ethereum, this has caused most BTC to sleep for a long time, and the scale of BTCFi has been stagnant.

Then USDa is a relatively important part of this. On the one hand, USDa can be regarded as providing the DeFi infrastructure (lending agreement) that is missing in the Bitcoin ecosystem. To make up for it, on the other hand, Avalon's USDa takes advantage of the CeDeFi lending platform to allow users to use USDa to obtain USDT from CeFi liquidity providers to solve the peg problem.

It also provides the Bitcoin network with a basic framework that can efficiently utilize assets and activate dormant BTC, allowing more BTC Holders to safely participate in on-chain liquidity activities and safely transfer BTC A large amount of sleeping BTC is put into the DeFi liquidity pool for exchange or earning income. Conclusion

It is foreseeable that as Bitcoin assets gradually come out of their slumber, BTCFi is very likely to become a new DeFi asset direction with a volume of hundreds of billions of dollars. , becoming the key to building a prosperous ecosystem on the chain.

As an investor in Avalon, I have become the absolute leader in Lending on the BTCFi track in a few months, which also makes me firmly believe that the future of Avalon and BTCFi will be better. Have better performance - using BTC as the core to build diversified financial product forms and DeFi scenarios, redefining the role of BTC in the DeFi field of the entire network.

As for whether the deep integration of BTC in the DeFi field can reach a critical turning point, it is worth looking forward to.