Threshold opens doors to institutional Bitcoin liquidity in DeFi through its tBTC bridge upgrade

The approximately $500 billion in Bitcoin controlled by global institutions and large holders represents an untapped liquidity source in decentralized ecosystems. Threshold, a blockchain infrastructure platform, has upgraded its tBTC bridge during Web Summit Lisbon to channel this massive reserve into DeFi protocols. The technical innovation of the new design removes access barriers: it allows institutional holders to mint tBTC on compatible networks through a single Bitcoin transaction, without requiring additional approvals or incurring gas fees on the Bitcoin chain.

Technical Mechanism: Distributed Security Instead of Centralized Custodians

The operation of the tBTC bridge is based on an innovative security structure. Each tBTC token represents one Bitcoin backed 1:1 on the main Bitcoin chain. What sets Threshold’s model apart is its application of chain rules through a threshold signature scheme: 51 of 100 independent node operators must authorize each transaction, distributing control among multiple participants rather than concentrating it in a single custodial entity. This decentralized architecture significantly reduces risks associated with single intermediaries, a structural weakness present in more centralized systems.

Once Bitcoin is converted into tokenized tBTC, it can freely circulate on Ethereum, Arbitrum, Base, Polygon, and Sui. Since its launch about five years ago, the bridge has processed over $4.2 billion in total volume, moving both retail and institutional Bitcoin into DeFi strategies. This steady flow demonstrates the real demand for decentralized access to Bitcoin liquidity.

Deepening DeFi Markets Through Bitcoin Collateral

As more tBTC enters decentralized exchange pools and collateral vaults, DeFi protocols can develop more robust markets. Threshold’s strategy aims for institutional exposure to Bitcoin to integrate with other existing crypto assets, enhancing liquidity depth and yield opportunities for sophisticated participants.

Competitive Landscape: WBTC, renBTC, and the Fragmentation of Tokenized Bitcoin

The tokenized Bitcoin market is not a Threshold monopoly. Wrapped Bitcoin (WBTC) and renBTC dominate volume-wise, supported by structures where specific custodians or small groups of entities manage the underlying reserves. Although these competitors record higher flows, their centralized model contrasts with Threshold’s distributed approach based on its chain rule of 51 to 100 operators.

Recently, the WBTC team announced expansion into Hedera, adding another destination for circulating tokenized Bitcoin. This parallel move of WBTC into new networks and the simultaneous upgrade of Threshold reflect a broader trend: multiple projects compete to channel institutional Bitcoin into smart contract ecosystems, each proposing its own security and efficiency solution.

The competition among these tokenization models is shaping how Bitcoin integrates into DeFi, impacting both on-chain liquidity depth and Bitcoin accessibility for complex strategies in decentralized protocols.