Starknet has launched a new function that allows Bitcoin holders to stake their assets on its Ethereum-based Layer 2 network.
Announced on Sept. 30, this update signifies what the team refers to as the first trustless approach to staking BTC outside its original blockchain. Participants can delegate tokenized representations of Bitcoin, earn staking rewards, and aid Starknet’s security, all while retaining custody of their coins.
Bitcoin was never crafted for staking purposes. Its proof-of-work model keeps miners central to the validation process, leaving minimal opportunities for holders to earn yield directly. Starknet addresses this issue by accepting wrapped forms of Bitcoin, including WBTC, tBTC, Liquid Bitcoin, and SolvBTC.
These assets can be integrated into Starknet’s consensus mechanism and are secured by zk-STARK cryptography. This technology is renowned for its high speed and post-quantum resilience.
This initiative also aligns with Starknet’s broader goal of becoming a foundational layer for Bitcoin. Recent tests demonstrated the team’s ability to use Circle STARKs to validate Bitcoin’s complete header chain in just 25 milliseconds on a Raspberry Pi, showcasing real-world capabilities.
Additionally, Starknet has unveiled decentralized sequencers and is working with BitVM researchers to investigate next-gen Bitcoin scaling solutions.
Will this enhance Bitcoin’s utility?
Starknet indicated that this upgrade seeks to address a significant disparity that has kept most of Bitcoin’s $2 trillion market capitalization inactive on its base chain.
According to the firm, around 98.5% of the supply remains untapped, while Ethereum has cultivated a flourishing staking ecosystem that currently holds over $38 billion, which is about one-third of its circulating supply.
In contrast, Bitcoin’s comparable sector is quite modest, at approximately $2.5 billion, with only 58,500 BTC circulating.
Starknet contends that staking Bitcoin on its network would help redirect some of this inactive value by providing BTC holders with new yield opportunities while reinforcing the security of the Ethereum layer-2.
Given that BTC is perceived as relatively lower-risk compared to other digital assets, investors usually accept lower returns. This dynamic makes BTC an efficient complement to STRK, Starknet’s native token, as securing the network with Bitcoin can be more cost-effective than relying solely on STRK.
Developers suggest that this framework could initiate a virtuous cycle, transferring more Bitcoin to Starknet and thus enhancing liquidity and network security.
This liquidity boost renders Starknet’s ecosystem more attractive to both builders and asset custodians, which, in turn, elevates STRK participation. Consequently, increased STRK engagement enhances the overall reward pool, making Bitcoin staking more appealing and attracting even more BTC into the system.
