The halving changed the game: how BTC now earns from staking

2025-11-22 07:53:37

In 2024, after Bitcoin’s halving, the crypto community faced an interesting paradox—how can a coin that runs on Proof of Work participate in staking? The answer turned out to be simple: if BTC itself can’t do it, the ecosystem will do it for it.

Why BTC is Needed by Everyone Again

Blockchain progress never stops. Previously, Bitcoin served simply as a store of value—you buy, hold, sell. But when PoS networks needed higher security, all eyes turned to BTC. Why? Because it’s the largest and most reliable cryptocurrency with the biggest market cap. Three protocols tell this story best.

Babylon: When BTC Protects PoS Networks

Babylon does something simple: bitcoins stay on Bitcoin, but their cryptographic weight secures PoS blockchains. How does it work? Encryption + smart contracts = BTC becomes the guardian of other networks without ever leaving its home.

It’s brilliant because:

You don’t need to move BTC (no risk of losing coins)
PoS networks get the security of the world’s largest crypto system
Binance Labs is already investing—this isn’t some weird idea

WBTC: Or How BTC Moved to Ethereum

WBTC is simple. You give BTC to a trusted organization, and they issue you an ERC-20 token (Wrapped Bitcoin), which is worth exactly one bitcoin. Now you can put this token on Uniswap, take out a loan on AAVE, farm on any DeFi protocol.

That’s how BTC went from a cold reserve to a hot DeFi asset. Why is this important? Because now 1 BTC on Ethereum = the ability to earn through smart contracts without staying on Bitcoin.

Stacks: When STX Stakers Earn Rewards in BTC

Stacks is a separate blockchain that sits right on top of Bitcoin. Their system is called Proof of Transfer (PoX): you lock up STX tokens and get rewarded… in bitcoins! Not in STX, but in BTC.

It’s an elegant solution because:

Stacks’ security is directly linked to Bitcoin
Stakers get access to the most valuable cryptocurrencies
It’s like a portal through which BTC gradually enters the DeFi ecosystem

What’s the Catch?

Of course, there are challenges:

Technical complexity — integrating PoW into PoS is non-trivial. It’s like trying to mix oil and water.

Liquidity problem — locking millions of BTC in staking could impact Bitcoin’s free circulation on the market.

Smart contract security — if there’s a bug in the code, your staked BTC could disappear. This has happened more than once.

What’s Next?

Most experts expect:

Scaling via Layer 2 solutions (lower fees, higher speed)
Better encryption and safer smart contracts
More collaboration between BTC and other PoS chains

Conclusion

BTC staking isn’t a revolution, it’s evolution. Bitcoin remains Bitcoin, but the ecosystem has found ways to earn more from it than just HODLing. Babylon, WBTC, and Stacks show that the crypto space constantly adapts, finding new ways to extract value.

Amid the halving and falling block rewards for miners, BTC holders can now earn through staking. This makes Bitcoin not just a store of value but also working liquidity for the entire DeFi ecosystem.

BTC3,38%

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