After the approval of the BTC spot ETF, institutional buying has pushed BTC's market value into the global top ten. Now the entire market is focused on two things: the inscription craze and scaling solutions. Everyone is pondering how to overcome Bitcoin's long-standing issues of yield generation difficulties, network congestion, and the lack of smart contracts. Layer 2 and sidechains are currently the mainstream solutions, but each has its own shortcomings—Lightning Network's functionality is too singular, Rollups are stuck at the mainnet verification stage, and the trust issues with sidechains are particularly challenging.
At this time, BounceBit's approach has some substance. They have created a re-staking chain, using dual custody with Mainnet Digital and Ceffu to secure asset safety, essentially putting a compliance lock on the sidechain. Once users deposit BTC and it converts to BBTC, they can either use it in CeFi for low-risk arbitrage or participate in mixed staking (BBTC + BB tokens) to earn node rewards. The generated LST tokens can also be re-staked. This model, which stitches together CeFi and DeFi, completely opens up the revenue paths for idle BTC.
On the technical details, they use MPC wallets to split private keys to prevent single points of failure, connect to exchange liquidity through MirrorX while keeping funds on-chain, and collaborate with asset management teams that specialize in capital rate arbitrage, a strategy that guarantees profits. The on-chain part is even bolder; BBTC can not only be staked for yield but also used to play various DeFi combinations in BounceClub. HTX Ventures' $6 million investment in them is not without reason—what BTC's ecosystem is currently missing is a solution that can simultaneously address trust and yield pain points.
Compared to purely technology-driven Layer 2 solutions, BounceBit's hybrid PoS mechanism is actually more pragmatic. Nodes use real BTC and BB tokens as collateral, with assets anchored in the custody party, avoiding the consensus vulnerabilities of sidechains and not having to wait long for Bitcoin's mainnet upgrades. With ETF funds continuously pouring in, products that can address both institutional arbitrage needs and retail DeFi yields may see greater TVL growth potential than purely decentralized solutions. After all, in a bull market, most people are not looking for idealism, but for solid annualized returns.