A shift is quietly underway in crypto. For years, staking primarily involved Ethereum and Proof-of-Stake chains—a way to secure networks and earn yield by locking assets. But the concept has evolved dramatically. First came liquid staking, which allowed stakers to earn yield while still using their tokens elsewhere. Then came restaking, which turned staked assets into collateral securing multiple networks simultaneously.

Now, a new wave is building—one that could reshape Bitcoin's role in the digital economy: native Bitcoin staking and restaking.

This isn't another DeFi experiment or a fleeting yield-farming trend. It's the beginning of Bitcoin's transformation from a "store of value" into an active participant powering and securing decentralized infrastructure—without ever leaving the Bitcoin chain.

From Ethereum to Bitcoin: The Staking Model Shift

Liquid staking solved a major friction point. Traditionally, if you staked your tokens (e.g., ETH or SOL), they became illiquid—you couldn't use or trade them while earning yield. Liquid staking protocols like Lido or Rocket Pool changed this by issuing liquid staking tokens (e.g., stETH) that represent your staked position but remain usable in DeFi.

This innovation succeeded massively because it enabled yield composability. Investors could stake, earn yield, and borrow/lend simultaneously.

Restaking took it a step further. Your staked ETH wasn't just securing the Ethereum network; you could "restake" it to help secure other networks or decentralized services. In return, you earned additional rewards. EigenLayer became the flagship of this movement, creating a market for shared security—where protocols could essentially rent trust from stakers.

But here's the catch: Until now, Bitcoin has been largely excluded from this revolution.

Why Bitcoin is Entering the Staking Era

Bitcoin is natively a Proof-of-Work chain, not Proof-of-Stake. That means you can't "stake" BTC like you stake ETH. You can mine it, hold it, wrap it onto other chains, but you can't natively lock it to secure protocols.

Until recently.

New protocols like Babylon and BounceBit now enable native Bitcoin staking and restaking—without wrapping, bridging, or moving Bitcoin off-chain. This development could open entirely new use cases for Bitcoin holders, institutional custodians, and DeFi protocols.

How Native Bitcoin Staking Works

To understand the breakthrough, it's worth examining Babylon, a protocol designed to make Bitcoin's massive market cap useful while remaining fully trust-minimized.

In simple terms, it works as follows:

You can lock BTC directly in time-locked vaults on the Bitcoin blockchain.

The locked BTC acts as economic collateral securing other PoS networks or applications.

The protocol ensures your BTC never leaves the Bitcoin network—it's only cryptographically referenced by other networks.

You earn yield from those networks as compensation for providing security.

Essentially, Babylon exports Bitcoin's economic power to other parts of the crypto ecosystem.

It's a clever bridge—not of asset transfer, but of security extension. This makes it more resilient and lower risk than wrapped Bitcoin (e.g., wBTC) that relies on centralized custodians.

In June 2025, Kraken announced plans to integrate Babylon's staking mechanism, signaling institutional confidence in the model. This is a tipping point—exchanges, custodians, and funds will soon be able to offer Bitcoin yield products without exposing users to bridge risks or regulatory gray areas.

BounceBit and the "BTC Restaking" Layer

While Babylon focuses on exporting Bitcoin's security, BounceBit does something slightly different—it imports Bitcoin's liquidity into an EVM-compatible environment built for financial products.

BounceBit is a dual-token restaking chain that combines Bitcoin and its native token to secure the network. Users can deposit BTC, participate in restaking, and access DeFi yield opportunities directly—all within a system designed for Bitcoin capital.

Think of it as a CeDeFi hub for Bitcoin holders seeking yield, liquidity, and composability without fully leaving the Bitcoin ecosystem. The chain integrates RWA projects, institutional treasuries, and yield strategies.

Though Babylon and BounceBit take different approaches, they target the same goal: making Bitcoin productive—a yield-generating collateral asset powering decentralized systems.

Why This Narrative Matters

Bitcoin represents over 50% of total crypto market capitalization, yet most Bitcoin sits idle. Holders—from retail investors to multi-billion dollar corporate crypto treasury reserves—are largely passive. In contrast, staking protocols on Ethereum have turned billions of dollars into active economic engines.

If Bitcoin staking gains momentum, it could mobilize massive idle liquidity into the DeFi and infrastructure economy, extending Bitcoin's utility beyond speculation.

In short, Bitcoin would no longer be just "digital gold"—it would become a productive reserve asset.

Risks Beneath the Surface

This innovation isn't without risks. Indeed, staking and restaking introduce new technical and economic risks:

Slashing Risk—When you restake, you agree to certain uptime or performance conditions. Failure to meet them could lead to partial collateral loss. Properly assessing such risk is complex, especially for Bitcoin.

Smart Contract Risk—Even if your Bitcoin stays on-chain, interacting with off-chain systems via cryptographic commitments still relies on protocol security. Bugs or attacks in these layers could lead to indirect losses.

Liquidity & Redemption Risk—If liquid Bitcoin staking tokens (e.g., LRTs) trade below their Bitcoin peg, users could face redemption queue congestion or depegging under market stress—similar to stETH in 2022.

Governance Centralization—As with Lido's dominance in Ethereum liquid staking, Bitcoin staking could concentrate power in a few large validators or custodians, undermining decentralization.

Regulatory Uncertainty—If Bitcoin staking products generate predictable yield, some jurisdictions may classify them as securities or interest-bearing deposits, triggering compliance obligations.

The key is that Bitcoin's brand is built on trust minimization. If these models introduce new dependencies, they must prove mathematically and operationally that they don't compromise this principle.

Institutional Interest is Warming

Despite the risks, institutional demand is already forming. Fund managers and crypto funds with large Bitcoin positions are eager for ways to generate returns without liquidating or bridging assets.

Kraken's involvement, plus venture backing from firms like Binance Labs, Polychain, and OKX Ventures in Babylon and BounceBit, shows growing market confidence. Mainstream custodians are exploring "staking-as-a-service" models that keep assets in cold storage while earning yield.

If just 1%-2% of global Bitcoin supply (~$25B-50B) were staked, it would represent a new institutional-grade yield market built on Bitcoin's credibility.

First-Mover Advantage

For investors and researchers, this is a rare asymmetric opportunity. The mechanics are complex, the protocols are immature, and yield sources are still forming. But history shows that narratives gaining early attention in new market cycles—e.g., DeFi in 2020 or NFTs in 2021—often create outsized winners.

The playbook here is simple:

Watch Bitcoin restaking TVL growth—Babylon, BounceBit, and related projects.

Track exchange integrations—institutional infrastructure drives adoption faster than retail hype.

Prioritize trust-minimized designs over high APYs. Aim for longevity, not quick gains.

Bitcoin's New Phase

If Bitcoin restaking succeeds, it will mark a philosophical shift as much as a financial one. The world's most secure, decentralized asset would begin securing other networks—turning idle capital into active trust infrastructure.

This could blur the lines between Bitcoin and other crypto ecosystems, opening a path for Bitcoin to generate sustainable on-chain yield without sacrificing its core integrity.

This story isn't about "DeFi on Bitcoin"—it's about Bitcoin as security collateral for a multi-chain world.

Final Thoughts

Crypto evolution has always been driven by utility cycles. The next cycle may be defined not just by new tokens or protocols, but by how the world's hardest money becomes a backbone for shared security and on-chain yield.

Liquid staking redefined Ethereum. Restaking is reshaping securities.

Today, Bitcoin is joining the race—not as an outsider, but as a heavyweight.

If Babylon, BounceBit, and their successors prove sound, the concept of idle Bitcoin may become a thing of the past.

Bitcoin doesn't just store value—it earns it.