Will institutions follow Bitcoin onto other chains?
The success of spot Bitcoin (BTC) exchange-traded funds (ETFs) and main BTC treasury firms marked one other step within the institutional adoption of crypto.
US-traded spot Bitcoin ETFs captured $518 million on Sept. 29 and have collected $57.3 billion in web flows since their launch in January 2024, in accordance with Farside Investors data.
BlackRock’s iShares Bitcoin Trust (IBIT) crossed $80 billion in assets by July 2025, changing into the quickest ETF to achieve that threshold in simply 374 buying and selling days. Adding to the stellar efficiency, names corresponding to Harvard Management Co. and the Abu Dhabi sovereign wealth fund Mubadala disclosed investments in Bitcoin via IBIT.
The digital asset treasury motion expanded in tandem with the adoption of ETFs. Strategy elevated its Bitcoin holdings to 649,031 BTC value $72.67 billion as of Sept. 29. Meanwhile, Metaplanet up-sized its share providing to $1.4 billion in September to fund aggressive Bitcoin acquisitions, concentrating on 210,000 BTC by 2027.
Institutions now face a selection between chilly storage and yield era. Max Gokhman, deputy CIO at Franklin Templeton Investment Solutions, noted that yield is a significant driver for institutional adoption of crypto.
And the SEC is clearing pathways for yield via regulated merchandise. On Aug. 6, a staff statement confirmed that liquid staking tokens don’t represent securities by default, whereas the Sept. 17 generic listing standards expedited crypto ETF approvals.
As extra altcoin ETFs are set to launch within the US, probably providing yields via staking, institutions will acquire publicity to the returns that crypto has to supply. This change may influence how Wall Street sees Bitcoin.
Bitcoin choices fragment throughout chains
Bitcoin is scattered throughout 365,958.79 BTC in artificial varieties totaling $41.8 billion as of Sept. 30, in accordance with Bitcoin Layers.
As Bitcoin doesn’t have native sensible contract capabilities, the thought of an artificial token, generally known as a wrapper, is to permit the utilization of BTC in DeFi protocols constructed on other blockchains.
Babylon leads native staking with 58,271.77 BTC, producing a 0.29% APR via a self-custodial protocol that secures proof-of-stake chains.
Using Babylon’s infrastructure, chains and purposes can faucet a safety layer maintained by BTC staking.
Lombard’s LBTC token transforms Bitcoin right into a liquid staking asset with 0.82% APY and $1.3 billion in complete worth locked (TVL), appropriate with Ethereum, Base, Solana, BNB Smart Chain, Katana, Sonic, Starknet, and Sui via native Chainlink and canonical bridge integrations.
Threshold operates tBTC v2 throughout Ethereum, Starknet, Sui, and MezoChain with 6,335.31 tBTC bridged and $717.7 million in TVL.
| Protocol | TVL | Yield/APR | Compatible Networks |
| Babylon | $6.61 billion | 0.29% APR | Bitcoin native (secures PoS chains by way of Bitcoin staking) |
| Lombard (LBTC) | $1.3 billion | 0.82% APY | 13 networks: Ethereum, Base, Solana, BNB Smart Chain, Katana, Sonic, Starknet, Sui, and others |
| Threshold (tBTC v2) | $717.7 million | N/A | 4 networks: Ethereum, Starknet, Sui, MezoChain |
| Solv Protocol (solvBTC) | $1.7 billion | 0.79%-13.28% APY | 12 networks: Arbitrum, Mantle, Bitcoin mainnet, and others |
| b14g | $300 million | ~5% APR (common) | Multiple networks (dual-staking with native tokens) |
| Zeus Network (zBTC) | $58.7 million | 4.52% APY | Bitcoin-to-Solana bridge (by way of Multi-Party Computation) |
| Thorchain | $74 million | N/A | Cross-chain native swaps (a number of blockchains) |
| Lightning Network | $438 million | N/A | Bitcoin Layer-2 fee channels |
Solv Protocol affords its solvBTC throughout 12 chains, together with Arbitrum, Mantle, and the Bitcoin mainnet, with $1.7 billion in complete worth locked (TVL).
Meanwhile, b14g affords a median of 5% APR via dual-staking mechanisms that mix BTC with native protocol tokens, throughout a $300 million TVL.
Zeus Network bridges Bitcoin to Solana by way of the zBTC wrapper, with $58.7 million in TVL utilizing Multi-Party Computation for trustless cross-chain interoperability. It affords 4.52% APY on staking by way of Fragmetric.
Thorchain facilitates native Bitcoin swaps for property throughout completely different chains with $74 million locked. Bitcoin bridges processed $1.87 million in September 2025.
Regarding chains with the most important quantities of wrappers, Ethereum holds 178,458.67 BTC as of Sept. 30, adopted by BNB Smart Chain at 24,082.67 BTC and Base at 21,647.85 BTC.
Besides the wrapper domination in established blockchains, Lightning Network presents itself as a big rail for BTC utilization.
Lightning maintains $438 million in TVL regardless of a 20% decline in public capacity from 5,400 BTC in late 2023 to 4,200 BTC by August 2025.
Coinbase reported that 15% of Bitcoin withdrawals had been routed via Lightning by mid-2025, and CoinGate documented that Lightning accounted for 16% of Bitcoin orders in 2024, in comparison with 6.5% two years prior.
Additionally, Tether deployed USDT over Lightning by way of Taproot Assets in January 2025, enabling dollar-denominated funds with out locking BTC in channels.
Practical difficulties
Despite the plurality of networks and wrappers that institutions may use so as to add composability to Bitcoin in the event that they want to, the important thing level of entry stays via ETFs.
Using BlackRock’s IBIT S-1 submitting for example, the doc specifies that Coinbase Custody Trust Company holds Bitcoin in segregated chilly storage wallets with multi-signature authentication, separate from all other Coinbase property.
In January 2025, BlackRock filed an modification to IBIT’s construction to permit in-kind creation and redemption, requiring Coinbase Custody to course of withdrawals to public blockchain addresses inside 12 hours.
Currently, there’s restricted room to include yield pathways into Bitcoin ETFs, which might contain exploring the DeFi ecosystem utilizing BTC.
| Protocol | Structure Type | Custody Model | Trust Assumptions |
| Babylon | Bitcoin-native staking protocol | Self-custodial (non-custodial time-locks on Bitcoin) | Trust-minimized: Uses Bitcoin’s native time-lock scripting. BTC stays on Bitcoin blockchain in consumer’s management. Relies on Bitcoin’s safety mannequin. No bridging, wrapping, or third-party custody. Slashing doable for validator misbehavior. |
| Lombard (LBTC) | Liquid staking token (LST) constructed on Babylon | Consortium mannequin with decentralized custody | Federated belief: Built on Babylon’s safety layer. Uses Security Consortium of institutional custodians. Multi-party validation required for minting/burning LBTC. Relies on finality suppliers and signers. Proof-of-reserves by way of Chainlink/Redstone oracles. 9-day unbonding interval (Babylon 7-day + Lombard 2-day rebalancing). |
| Threshold (tBTC v2) | Decentralized bridge protocol | Distributed multi-signature custody (100-of-100 threshold) | Honest-majority assumption: Randomly chosen group of 100+ node operators maintain keys by way of threshold cryptography. Requires 51-of-100 signers to approve operations. Relies on probabilistic safety and staked T tokens for financial safety. Forward safety protects present deposits. SPV proofs confirm Bitcoin state. No single custodian controls funds. |
| Solv Protocol | Multi-chain Bitcoin LST platform | Varies by integration | Multi-chain belief: Relies on safety of every built-in chain (12 chains). Cross-chain bridge dependencies. Structured product framework with yield aggregation. Trust assumptions differ by vacation spot chain and vault technique. |
| b14g | Bitcoin restaking protocol | Dual-staking (BTC + native token) | Merge restaking mannequin: Combines staked BTC with protocol native tokens. No BTC slashing threat (solely native token topic to slashing). Relies on safety of underlying networks being secured. Trust distributed throughout validator units. |
| Zeus Network | Cross-chain bridge (Bitcoin to Solana) | Multi-Party Computation (MPC) custody | Federated MPC belief: Uses threshold signature scheme requiring a number of events to cooperate. Decentralized node community manages zBTC minting/burning. Trust distributed throughout validator set. Depends on Solana community safety for vacation spot property. |
| Thorchain | Decentralized liquidity protocol | Threshold Signature Scheme (TSS) with bonded validators | Economic safety mannequin: Validators submit bonds (2-3x worth of pooled property). Continuous Liquidity Pools (CLPs) allow native swaps. Slashing mechanism for malicious habits. Trust distributed throughout economically incentivized validator set. No wrapped tokens—native asset swaps. |
| Lightning Network | Bitcoin Layer-2 fee channels | Self-custodial (channel-based) | Channel counterparty belief: Users keep custody by way of pre-funded fee channels. Bilateral belief between channel companions. Can route via a number of channels. Time-locked sensible contracts implement settlement. Trust-minimized for direct channels; routing provides complexity. No bridging or wrapping. |
Additionally, the Financial Action Task Force’s Travel Rule mandates monetary institutions and Virtual Asset Service Providers to transmit originator and beneficiary figuring out info with digital foreign money transactions.
This commonplace requires end-to-end transparency to assist regulation enforcement and mitigate monetary crime dangers. ETF issuers should keep segregated custody with regulated entities which can be able to producing audit trails that fulfill the journey rule necessities.
Wrapped Bitcoin protocols introduce belief assumptions that battle with institutional custody requirements.
Threshold’s tBTC depends on decentralized node operators to keep up the bridge between Bitcoin and Ethereum, making a multi-signature custodial mannequin the place no single entity controls funds.
Although that is optimistic from a decentralization perspective, it introduces a safety dependency on the integrity of the validator set. Lombard makes use of Babylon’s Bitcoin Staking Protocol, mixed with a consortium mannequin for custody, which distributes threat throughout a number of events.
Again, there’s an effort to decentralize single factors of failure; nevertheless, this provides coordination necessities that complicate audit procedures.
A Bitcoin ETF holding LBTC on Base would face scrutiny on Optimism’s fraud-proof system, Base’s sequencer centralization, and the bridge’s oracle dependencies.
Each wrapped BTC variant trades off safety assumptions. BitGo’s wBTC makes use of centralized custody with authorized agreements, whereas Threshold’s tBTC distributes custody throughout validators, who should keep uptime and cling to trustworthy habits.
These layered dangers multiply audit surfaces past what segregated chilly storage presents.
Yield profiles and cost-benefit
Babylon’s 0.29% APR on staked Bitcoin compares unfavourably to Ethereum’s 3.2% staking yield or Solana’s 7.1% APY out there via liquid staking derivatives.
Lombard’s 0.82% return requires institutions to simply accept publicity to 13 completely different blockchain networks, every with distinct safety fashions and potential failure modes.
These examples reveal the problem {that a} 1% yield benefit on a 5% Bitcoin allocation contributes simply 5 foundation factors to complete portfolio returns.
Institutions may discover inadequate compensation for introducing bridge threat, oracle dependencies, and cross-chain settlement complexity.
Franklin Templeton’s Gokhman noticed that institutions more and more view Bitcoin as a cyclical, high-beta threat asset that correlates with conventional monetary markets as institutional adoption grows.
This framing means that portfolio managers favor to separate their Bitcoin holdings from yield era, sustaining BTC as a pure publicity play whereas sourcing returns from property with extra established DeFi infrastructure.
An establishment may maintain Bitcoin via IBIT’s segregated chilly storage whereas deploying capital into Ethereum ETFs that may probably supply staking yields via confirmed liquid staking tokens authorised by the SEC’s August 2025 steerage.
Dividing publicity requires allocating capital throughout a number of positions however preserves custody readability and simplifies compliance reporting.
The different of bridging Bitcoin to entry DeFi yields forces institutions to judge whether or not Threshold’s node operators or Lombard’s decentralized consortium gives equal safety to Coinbase Custody’s federally regulated chilly storage.
Each bridge introduces a brand new counterparty, and every vacation spot chain provides one other threat floor that chain threat committees should assessment. The fragmented liquidity throughout 365,958 BTC, unfold throughout completely different protocols and chains, compounds this complexity, as no single venue affords the depth that institutions require for entry and exit with out market influence.
In conclusion, Bitcoin layer-2 and different layer protocols supply technical options for yield era. However, it’s as much as regulators to discover a strategy to accommodate these paths into regulated merchandise, and it’s as much as institutions to resolve whether or not direct publicity is definitely worth the threat.
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