Original Title: Bitcoin Yield Without the Leap of Faith
Original Author: Hong Sun
Original Source: https://cryptoslate.com/
Compiled by: Daisy, Mars Finance
Secure Bitcoin yield solutions allow institutional users to achieve value-added returns while maintaining control of their assets.
This article is a guest commentary written by Hong Sun, Head of Institutional Business at Core DAO.
Traditional financial institutions have begun to benefit from the rise in Bitcoin prices—but their methods are far from optimal. Most institutions hoard Bitcoin like cash, satisfied with price exposure while ignoring its appreciation potential. This state of affairs will not last; Wall Street will eventually seek more efficient ways to utilize Bitcoin assets.
But in the crypto space, caution is paramount. We have witnessed how chasing yields without understanding underlying risks can backfire. Fortunately, secure and sustainable Bitcoin yield products that minimize principal risk are no longer theoretical; they are now real and available.
Lessons from 2022: Yields also have hierarchies.
Institutions holding Bitcoin should reflect on the recent history of the crypto industry. The market crash in 2022 exposed the dangers of yield strategies built on fragile foundations—once-mighty giants like Voyager, BlockFi, Celsius, Three Arrows Capital, and FTX have now perished in the crypto graveyard due to poor risk management and unsustainable yield promises.
What is the lesson? Not all yields are created equal. Many so-called yield products introduce new layers of risk: counterparty risk, custody vulnerabilities, liquidation mechanisms, and smart contract bugs. These factors are fatal for institutions that misjudge risks.
The core issue is that Bitcoin differs from Ethereum; its proof-of-work model does not provide native staking rewards. Therefore, holders have always been forced to earn yields through lending, re-staking, or providing liquidity—methods that all come with trust compromises.
Bitcoin holders face a dilemma: on one hand, they enjoy self-custody and absolute security, while on the other hand, they are tempted by yields. Bridging this gap should not require people to bet on faith.
Time Lock: Bitcoin's Native HODL Functionality
Bitcoin, while not supporting smart contracts like Ethereum, has a powerful native feature: the time lock. This feature is designed to allow users to achieve 'HODL' through mathematical certainty—locking BTC until a specified block height is reached—but it has long been underutilized.
Today, the same HODL mechanism is opening new frontiers: creating yields without relinquishing custody.
The innovation lies in a new type of staking model that directly uses Bitcoin (rather than wrapped versions) as the staking asset. Through Bitcoin's 'CheckLockTimeVerify' (CLTV) function, holders can lock BTC and participate in protecting the blockchain network to earn yields while maintaining complete control. Their Bitcoin always remains in their wallets, cannot be transferred, re-staked, or lost—yet it can still generate returns.
This is precisely the level of security required by financial institutions. No new trust assumptions are needed, there is no liquidation risk, and it does not involve the complexity of smart contracts. It simply uses Bitcoin according to its design principles, with an added layer of incentives.
Institutions are already taking action.
The adoption of this model by institutions is already in progress. Valour Inc., a subsidiary of DeFi Technologies, recently launched the world's first yield-bearing Bitcoin ETP using this mechanism—combining the immutability of Bitcoin custody with the performance advantages of secure staking.
These solutions enable institutions to move beyond high-risk lending and speculative trading strategies. For the first time, Bitcoin can serve not only as a store of value but also as an asset class capable of generating yields.
From passive holding to active participation.
For institutions holding Bitcoin through custodians or ETFs, the current Bitcoin is a negative yield asset. Custody and management fees erode returns, contradicting the core argument for Bitcoin as an inflation hedge and store of value.
Secure Bitcoin yields change this equation. Institutions can now generate returns while supporting decentralized networks—this has become an important connecting bridge between traditional finance and blockchain-native systems.
This evolution is still in its early stages, but the direction is clear: the future of Bitcoin is not idle; it is active, integrated, and aligned with institutional needs.
Key Insights
The right Bitcoin yield solutions no longer require new trust assumptions or interaction with unverified products. They are rooted in Bitcoin's own security model, utilizing the time lock feature originally designed as a HODL mechanism to create returns while protecting principal.
As financial institutions gradually understand this development, those who act swiftly will gain a competitive edge. The question is no longer 'Is institutional-grade Bitcoin yield feasible?' but 'How will you utilize it?'
