Bitcoin layer 2s bootstrap $2.7bn in DeFi deposits with points offerings

A version of this story appeared in our The Decentralised newsletter on March 5. Sign up here.

GM, Tim here.

Here’s what caught my DeFi-eye recently:

• Bitcoin DeFi is blowing up thanks to layer 2s
• One Filecoin protocol is getting in on the points meta
• Check out the best bits of this year’s ETHDenver

Bitcoin DeFi? What’s going on?

DeFi deposits on the Bitcoin network have soared to over $2.7 billion and are up 723% from the start of the year mainly thanks to Merlin Chain — a so-called Bitcoin layer 2 network.

Merlin Chain is running a campaign — called Merlin’s Seal — which is similar to one run by the widely-criticised Ethereum layer 2 Blast.

Users can deposit Bitcoin, stablecoins, and more than a dozen Bitcoin-related assets to earn M-points. Later this month, users will be able to claim MERL governance token rewards based on the M-points they have accumulated.

Finally in April, users will be able to withdraw their staked assets.

But hold up — if Bitcoin can’t support smart contracts, how does it have billions worth of deposits? You might be asking.

Currently, like Blast, Merlin Chain just sends deposits to a wallet, although it claims this process is non-custodial.

Later, Merlin Chain will operate as a separate blockchain built on top of Bitcoin using zero-knowledge proofs.

And Merlin Chain is not alone. B² Network, another upcoming Bitcoin layer 2, is running a similar campaign and has already accumulated over $500 million of deposits.

Filecoin liquid staking protocol GLIF to offer points

GLIF, a long-running project on Filecoin, is planning to give out points to those who stake the Filecoin blockchain’s FIL token.

In early February, GLIF announced a $4.5 million raise and the launch of a points system sometime in the first quarter of the year.

Since then, the value of crypto locked in GLIF’s Filecoin liquid staking protocol has grown to more than 161%. Other liquid staking protocols on the chain have also experienced similar growth.

GLIF founder Jon Schwartz told DL News he attributes the jump to the upcoming points system and to growing comfort with Filecoin.

The influx also shows a rekindling of interest in Filecoin after its FIL token plummeted some 95% during the crypto winter.

Points programmes, which function much like traditional businesses’ rewards programmes, can juice user activity.

Unlike airdrops, however, they allow US-based projects to avoid the regulatory headache that can come with promising or issuing tokens.

ETHDenver wraps up

ETHDenver is over for another year, and DL News is here to give you the quick rundown of everything that happened at the event.

As always there were some big announcements. Trading app Robinhood announced it will let users of its crypto wallet trade digital assets through Arbitrum, while Bitcoin staking protocol Babylon announced a collaboration with Ankr to create Bitcoin liquid staking tokens.

SEC Commissioner Hester Peirce delivered another scathing reproach of her agency where she expressed frustration over delayed action on Bitcoin ETFs.

I also wrote up a retrospective on the entire event, focusing on independent presidential candidate Robert F. Kennedy’s visit to ETHDenver.

Data of the week

Bitcoin has overtaken Solana to become the fifth-biggest blockchain in terms of DeFi TVL.

The OG cryptocurrency’s rapid ascent to over $2.7 billion in TVL is mostly due to a single concept: creating layer 2s on Bitcoin. Two upcoming Bitcoin layer 2s — Merlin Chain and B² Network — account for almost 90% of all Bitcoin’s TVL.

This week in DeFi governance

VOTE: Uniswap makes more progress towards distributing fees to UNI token holders

VOTE: Euler wants to increase EUL liquidity to make it easier for DeFi users to get involved in governance

VOTE: Aave to take GHO stablecoin cross-chain with Chainlink’s CCIP

Post of the week

Ethena Labs head of growth Seraphim Czecker edits the article cover for DL News’ piece covering the Gauntlet and Aave split.

We’re also big Guy Ritchie movie fans at DL News. ;)

What we’re watching

Friend.tech, one of the first dApps to offer users points, may be preparing to airdrop 100% of its planned token to early users.

Got a tip about DeFi? Reach out at tim@dlnews.com.