Source: CoinDesk, Omkar Godbole
Article Highlights
• Bitcoin’s narrative is expanding from “value storage” to decentralized finance (DeFi)
• Kevin Farrelly of Franklin Templeton believes this is a positive signal
• DeFi scenarios give Bitcoin more “investment and use value” and increase the attractiveness of assets
With the end of the Dubai Token2049 Summit, the positioning of Bitcoin (BTC) is rapidly evolving: from traditional “digital gold” to an asset with DeFi application potential, it has begun to compete with Ethereum, Solana and others in the same track.
Institutions including Franklin Templeton believe this is a positive trend that will expand more practical uses for Bitcoin without weakening its core appeal as a means of storing value.
"I don't think Bitcoin DeFi will dilute Bitcoin's core narrative," Kevin Farrelly, managing director of Franklin Templeton Blockchain Ventures and vice president of digital assets, said in a speech at the Bitlayer side event this week. "On the contrary, this development expands Bitcoin's appeal to a specific group of investors-these people have certain technical capabilities and can optimize asset allocation based on returns, security or custom portfolio goals."
He pointed out: "These users are not trying to overthrow Bitcoin's core positioning as a 'store of value', but to expand its functionality based on this. This is not a weakening of the narrative, but an iterative upgrade of the infrastructure."
Franklin Templeton is an investor in Bitlayer. Bitlayer is a Bitcoin Layer 2 network based on the BitVM solution. While maintaining the security of the main network, it introduces smart contracts, DeFi integration, faster transaction processing and lower fees, which are not natively available in the Bitcoin base layer.
The agency's Bitcoin ETF (EZBC) has recorded a net inflow of $260 million since its listing on January 11, 2024. As of May 1, 2025, the fund holds a total of 5,213 BTC, which is more than $500 million at the current price.
From digital gold to digital financial infrastructure
Satoshi Nakamoto's original vision for the Bitcoin blockchain was to create a decentralized financial system to achieve financial sovereignty and privacy protection and eliminate dependence on intermediaries. However, more than a decade later, the system's native cryptocurrency, Bitcoin (BTC), quickly gained a reputation as "digital gold" and became a reliable means of storing value, and this narrative has been working well.
According to CoinDesk data, Bitcoin's market value has now exceeded $1.9 trillion, accounting for nearly 60% of the total market value of the entire crypto market (about $3.12 trillion). It is the most liquid crypto asset in the market, with an average daily trading volume of billions of dollars worldwide, and has been included in the asset reserves of many listed companies.
In addition, in recent years, a variety of compliant investment tools around Bitcoin have continued to emerge, allowing participants in traditional financial markets to access such assets.
For example, according to Farside Investors data, the 11 Bitcoin spot ETFs listed in the United States since January 2024 have attracted nearly $40 billion in funds so far. Ethereum spot ETFs, on the other hand, had net inflows of less than $3 billion during the same period.
The strong demand for institutional investors to allocate Bitcoin is widely attributed to its simple and persuasive narrative of "digital gold" - compared with platforms such as Ethereum or Solana that support complex DeFi applications, BTC has a clearer positioning and a lower threshold for understanding, making it easier to accept.
Farrelly told CoinDesk: "Bitcoin's core positioning is a digital value store. Unlike other more complex crypto projects, Bitcoin does not require too much technical explanation - it has clear goals and clear logic. This clarity may be the reason why it is easier to understand, build investment models, and even allocate through ETFs." He added: "In a crypto market full of complexity and speculative narratives, Bitcoin itself provides a stable and clear investment direction - and this direction is increasingly recognized by the market."
However, for this reason, many Bitcoin "minimalists" oppose the introduction of DeFi-like functions directly into the Bitcoin main chain, fearing that this may weaken its core appeal.
However, the popularity of “Bitcoin DeFi” was evident at Bitlayer’s side events and the main forum Token2049, reflecting the continued rise in demand for on-chain gain opportunities among BTC holders.
Bitlayer co-founder Charlie Yechuan Hu told CoinDesk: “Bitcoin DeFi products with trust-minimized cross-chain bridging mechanisms and sustainable yield models are increasingly becoming a core need for BTC holders and Bitcoin network maintainers.”
He further pointed out: “We are building critical infrastructure to enable Bitcoin DeFi through BitVM technology. Many promising Bitcoin DeFi use cases will significantly increase BTC’s asset value and enhance users’ motivation to hold and use it.”
This Bitcoin DeFi wave may also benefit miners. Although Bitcoin block rewards are halved every four years, the increased on-chain transaction activity driven by DeFi applications can compensate for the decline in revenue by increasing transaction fee income, thereby supporting the long-term security and sustainability of the Bitcoin network.
Farrelly emphasized: "The most important point about Bitcoin DeFi is that it introduces new transaction fee income - in the context of the continued reduction of block rewards, this is crucial to the long-term security and sustainable development of the network."
Charlie Yechuan Hu holds a similar view, pointing out that as the network computing power continues to increase, miners need more on-chain activities like Bitcoin DeFi to maintain their income.
He added: We need to build a Bitcoin Rollup system with security verification capabilities so that transaction fees can flow back to the Bitcoin mainnet.
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