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Starknet Integrates Bitcoin Staking: A New Chapter for BTC in DeFi
Beginner
2025-10-01 | 10m
The Ethereum Layer-2 landscape witnessed a groundbreaking development on September 30, 2025, as Starknet, a leading zero-knowledge rollup, successfully launched its Bitcoin staking functionality on mainnet. This strategic integration, following a preparatory upgrade on September 15th, marks a pivotal moment in the convergence of Bitcoin and decentralized finance (DeFi). It empowers Bitcoin holders to actively participate in Starknet's consensus mechanism without relinquishing custody of their assets, all while earning rewards in the network's native STRK token. The Starknet Foundation has underscored its commitment to this new "BTCFi" ecosystem by allocating a massive 100 million STRK (approximately $12 million) incentive program to stimulate Bitcoin-based activities like lending and borrowing on the network. This initiative, coupled with planned Bitcoin-denominated yield products from institutional players like RE7 Capital, positions Starknet as a formidable execution layer for Bitcoin, aiming to unlock the vast, dormant capital within the world's largest cryptocurrency.
The Mechanics of Bitcoin Staking on Starknet
The integration of Bitcoin into Starknet's proof-of-stake consensus is both innovative and meticulously designed. Unlike traditional proof-of-work mining, staking on Starknet allows users to delegate their Bitcoin to help secure the network and earn rewards for their contribution. The system does not directly use native Bitcoin on its base layer. Instead, it relies on wrapped Bitcoin assets that represent Bitcoin on the Starknet network. Initially, the supported assets include WBTC, LBTC, tBTC, and SolvBTC, with a governance mechanism in place to add more derivatives in the future.
A critical parameter of this integration is the staking weight. In the consensus mechanism, BTC staking has been assigned a weight of 0.25, meaning it contributes to 25% of the overall consensus power. The remaining 75% is maintained by the staking of Starknet's native token, STRK. This balanced approach aims to leverage Bitcoin's security while preserving the central role of STRK. Furthermore, to improve capital efficiency for stakers, the unstaking period—the time required to withdraw staked assets—has been standardized to 7 days for both BTC and STRK, a significant reduction from the previous 21-day period for STRK. StarkWare emphasizes that this is the first implementation of trustless Bitcoin staking on a Layer-2 network, allowing users to retain custody of their assets throughout the process, a key differentiator from many centralized staking services.
Economic Incentives and the STRK Token
The launch of Bitcoin staking is accompanied by a substantial economic incentive package designed to kickstart network activity and attract users. The core reward for staking Bitcoin on Starknet is paid in STRK tokens. This model immediately provides Bitcoin holders with an avenue to gain exposure to the Starknet ecosystem and its potential growth. The STRK token itself has faced market challenges, with its price declining 74% over the past year to a market capitalization of around $498 million as of late September 2025. This new utility and demand driver is a strategic move to bolster the token's ecosystem.
The most significant incentive comes from the Starknet Foundation, which has dedicated 100 million STRK tokens (valued at approximately $12 million) to foster the growth of the "BTCFi" ecosystem on Starknet. This fund is intended to incentivize various Bitcoin-related activities on the network, with a particular focus on BTC-based collateralized borrowing and lending. By making it financially attractive for developers and users to build and participate in Bitcoin-centric DeFi applications, Starknet aims to position itself as the most cost-effective platform for executing complex yield strategies using Bitcoin as collateral.
Broader Ecosystem Development and BTCFi Vision
The introduction of Bitcoin staking is more than a standalone feature; it is the cornerstone of Starknet's broader ambition to become Bitcoin's premier financialization layer. StarkWare's CEO, Eli Ben-Sasson, has articulated a clear vision, stating that Starknet is "perfectly suited to establish itself as the financialization layer and execution layer for Bitcoin," a scenario he believes will be "winner-takes-most". He identified the prevalent "HODL" mentality as a limitation for Bitcoin, referring to it as "pure capital" that has been underutilized in DeFi due to the historical superiority of centralized exchanges.
This vision is materializing under the banner of "BTCFi on Starknet". A key development in this ecosystem is the announcement from London-based investment firm RE7 Capital, which plans to launch a tokenized, Bitcoin-denominated yield product on Starknet in October 2025. This product is designed to generate returns directly in Bitcoin by combining off-chain derivatives, DeFi strategies, and the new Bitcoin staking mechanism. By tokenizing the fund, RE7 Capital aims to democratize access, allowing a broader range of investors to participate in sophisticated institutional-grade yield strategies. These initiatives collectively represent a strategic push to expand Bitcoin's utility beyond a store of value and into a productive, yield-generating asset within a decentralized framework.
Challenges, Competition, and Future Outlook
Despite the promising launch, Starknet faces a competitive and challenging landscape. The field of Bitcoin Layer-2 solutions and financialization protocols is becoming increasingly crowded. Other projects, like the GOAT Network, also aim to bring programmability to Bitcoin and often prioritize paying rewards in Bitcoin itself, in contrast to Starknet's STRK-denominated rewards. Furthermore, established players like Coinbase have already made significant inroads with services connecting their clients to lending protocols on their own Layer-2 network, Base, which has facilitated nearly $10 billion in loans according to a Dune dashboard.
From a cultural and ideological perspective, Starknet's approach may face skepticism from Bitcoin maximalists. This group typically views all cryptocurrencies other than Bitcoin as inferior "shitcoins," and the fact that staking rewards are paid in STRK, not BTC, may not align with their purist philosophy. Finally, the overall success of this initiative is tied to the health and adoption of the STRK token, which has experienced significant price volatility since its all-time high in 2024. Broader market conditions and the successful execution of Starknet's roadmap will be critical factors.
Looking ahead, Ben-Sasson has made Starknet's priorities clear: "We are not leaving Ethereum, but our main goal for 2025 and 2026 is absolutely to serve Bitcoin in the best way we can". This signals a strong, continued focus on deepening Bitcoin integration. The true test will be whether the combination of seamless trustless staking, a massive token incentive program, and innovative yield products like RE7 Capital's can attract a critical mass of Bitcoin's enormous capital and establish Starknet as the dominant execution layer for BTCFi.
Conclusion
Starknet's integration of Bitcoin staking is a bold and architecturally significant step in the evolution of both the Bitcoin and Ethereum ecosystems. It successfully bridges the security and capital of Bitcoin with the scalability and programmability of an advanced Ethereum Layer-2. By allowing Bitcoin holders to become trustless validators and earn yields while retaining custody, Starknet is directly addressing the long-standing challenge of Bitcoin's idle capital. The accompanying 100 million STRK incentive fund and the development of sophisticated financial products like those from RE7 Capital demonstrate a holistic strategy to bootstrap a vibrant BTCFi economy. While competition and ideological differences present challenges, this move fundamentally expands the utility of the world's largest cryptocurrency and solidifies Starknet's position as a key innovator at the intersection of Bitcoin and decentralized finance.
References:
Starknet. (2025, September 30).
Starknet x Bitcoin: The Next Step – BTCFi on Starknet.
https://www.starknet.io/blog/starknet-x-bitcoin-the-next-step-btcfi-on-starknet/
Coinlive. (2025).
Starknet announces BTC Staking and 100 million STRK incentive program. Retrieved from
https://www.coinlive.com/news-flash/917883
Decrypt. (2025).
Bitcoin Staking Debuts on Ethereum Layer-2 Starknet With STRK Incentives. Retrieved from https://www.aicoin.com/en/article/490185
RootData. (2025).
Starknet launches BTC staking integration upgrade. Retrieved from
https://tw.rootdata.com/news/364763
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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