Bitcoin DeFi refers to financial services such as lending, borrowing, trading, and yield generation built on Bitcoin or Bitcoin Layer 2 networks. 

This allows bitcoin holders to utilize their assets dynamically by participating in DeFi protocols that were once primarily accessible to smart contract-enabled blockchains, like Ethereum or Solana. 

Whether you’re looking to provide liquidity, lend BTC, or stake assets on a Bitcoin Layer 2, you can now put your bitcoin to work.

In this guide, we’ll break down three of the best ways to earn crypto in Bitcoin DeFi.

Stablecoin Lending

Stablecoin lending allows users to earn interest by supplying stablecoins like USDT, DLLR, or XUSD to lending pools. 

Unlike centralized lending platforms, Bitcoin DeFi protocols like Sovyrn operate in a non-custodial manner. Users retain full control over their funds while earning a variable APY. By participating in stablecoin lending on Sovryn, users contribute an overcollateralized borrowing system, reducing default risks while benefiting from flexible withdrawal options.

However, lending returns depend on market conditions, and liquidity constraints may temporarily limit withdrawals. To maximize earnings, users should monitor APYs, assess lending pool liquidity, and the reputation of the DeFi lending app they are using. 

Acting as a Liquidity Provider on a Decentralized Exchange

Decentralized exchanges (DEXs) in Bitcoin DeFi allow users to earn crypto by providing liquidity to trading pools. 

Decentralized trading pools enable users to deposit BTC or Bitcoin-native assets into liquidity pools, earning a share of trading fees and rewards paid out in tokens. 

Unlike centralized exchanges, these DEXs operate without intermediaries, ensuring users retain full control of their funds. Bitcoin DEXs offer a trustless and decentralized way to generate passive income through liquidity provision. 

Staking Bitcoin on Layer 2s

Staking bitcoin on Bitcoin DeFi platforms like Acre allows BTC holders to earn yield while maintaining ownership of their assets. 

Unlike traditional proof-of-stake models, Acre uses a liquid restaking approach, where users deposit BTC and receive a derivative token that can be used in DeFi for additional rewards. 

Built on EigenLayer’s infrastructure, Acre enhances blockchain security while distributing protocol fees to stakers. This method introduces a new way to make bitcoin a productive investment without requiring users to sell or move it to centralized platforms. 

As Bitcoin’s DeFi ecosystem grows, bitcoin staking protocols like Acre provide an accessible way to generate passive income while securing blockchain networks.

Final Thoughts

Bitcoin DeFi is unlocking new ways to earn crypto. By lending Bitcoin-native stablecoins, providing liquidity on decentralized exchanges, or staking bitcoin on Layer 2s, users can put their assets to work while staying in control of their funds. 

Each method comes with its own risks—whether it’s liquidity constraints, variable yields, or smart contract vulnerabilities, so doing your own research and assessing risk is essential.