Why Bitcoin Needs DeFi: Seraphim on Scalable Yield, Bitcoin Staking, and the Fight for Liquidity

In this episode of the Bullish on Bitcoin Show, BOB co-founder Alexei Zamyatin sat down with Seraphim, a well-known growth operator in DeFi who has worked at three of its most successful protocols: Euler (lending), Lido (liquid staking), and Ethena (synthetic dollars). He is now joining BOB as an advisor on DeFi strategy. The conversation was recorded live as a Twitter Space, right after Bitcoin hit a new all-time high and the community celebrated Pizza Day, which made it a fitting moment to ask a big question: why is so little of the world's largest crypto asset actually used in DeFi, and what would it take to change that?

Here's a rundown of the highlights.

An Ethereum DeFi Veteran Looks at Bitcoin

Seraphim was upfront that he came to crypto through Ethereum, not Bitcoin. What pulled him toward Bitcoin, he joked, was "incredible FOMO" from watching the BTC chart while his other assets fell. The more serious reason is a gap he can't stop thinking about: the enormous size of Bitcoin's market cap compared to the small amount of it that is actually present in DeFi. In his view, even a small share of that capital migrating on-chain could be huge, and no one has properly cracked it into the billions yet. His read at the time was that this was not far away, possibly within the year.

Bitcoin Is Already Powering DeFi, Just Indirectly

Alexei pointed out that a lot of the liquidity behind Ethena actually came from Bitcoin holders. Seraphim confirmed this and described the common trade: hold Bitcoin, borrow USDC against it, and put that USDC into a high-yield strategy. As long as the strategy earns more than the borrowing costs, you stay long Bitcoin while collecting the spread. A large share of crypto's capital, he said, comes from Bitcoin funds doing exactly this.

The catch is that this is an indirect user base, mostly funds holding Bitcoin on behalf of clients. What hasn't happened yet is Bitcoiners themselves moving large amounts on-chain, and Seraphim sees that as the real next step for Bitcoin DeFi.

The Core Lesson: Safe, Scalable Yield

Asked for the biggest lesson from his time at Ethena and Lido, Seraphim kept it simple. People want yield on their Bitcoin that is relatively safe and stays stable as capital grows, whether that's fifty million dollars or half a billion. Because Bitcoin holders are conservative for good reasons, he pointed to approaches like tokenizing custodian receipts, where the Bitcoin stays with a trusted custodian while holders still earn a return.

"High risk adjusted yield is the name of the game."

Why Bitcoiners Behave Differently

Comparing Bitcoin and Ethereum communities, Seraphim argued that Ethereum users are used to moving capital around, from the ICO days to CDPs and staking. Bitcoin holders, by contrast, are much more reluctant:

"They treat Bitcoin as a religion and it was very hard to convince them to take their Bitcoin anywhere."

That is starting to change. Bitcoin L2s and Babylon have convinced more players, especially in Asia, that earning yield is worth considering. For a whale sitting on a very large stack, he noted, even two to three percent can cover living expenses.

What Happened to Tokenized Hash Rate?

Alexei raised an interesting question: Bitcoin has native emissions through mining, so why hasn't tokenized hash rate taken off the way staking-based products have? Seraphim admitted he wasn't sure, since it doesn't seem like a bad idea. His guess was a lack of teams with the right execution and early demand, noting that Ethena and Lido weren't the first of their kind either; they were simply the first to execute well.

Alexei added that BOB worked with Marathon Digital while it explored tokenizing hash rate, and described why it's complicated. Public mining companies are structured like traditional finance businesses, and buyers of tokenized hash rate absorb extra risks tied to energy markets, hardware, and political stability in regions with cheap electricity.

Bitcoin Staking and the Pareto Effect

On whether Bitcoin liquid staking will play out like Ethereum's, Seraphim said DeFi tends to follow a Pareto distribution, with a few top players capturing most of the market. He expects Bitcoin to be no exception, with one or two dominant players eventually emerging among Babylon competitors and the many liquid staking tokens like Lombard, Solv, and others. The moat, in his view, will be operational, regulatory, or corporate, because yields tend to normalize across similar products. He also described Bitcoin DeFi as still being in its first inning.

The EigenLayer Problem: Where Does Yield Come From?

Alexei described the flywheel he hopes Bitcoin staking can create: staked Bitcoin becomes liquid tokens, those tokens are used in DeFi on chains secured by Bitcoin staking, that activity generates fees, and the fees flow back to stakers, attracting more Bitcoin which potentially contributes to more fees and so on. Seraphim cautioned that EigenLayer faced a classic problem: lots of assets and plenty of appetite for compounding yield, but no organic source of yield large enough to support it. Bitcoin faces the same conundrum today.

"There's no sustainable source of yield yet in the market."

Alexei responded that the situation on Bitcoin differs in an important way. Ethereum's restaking arrived in a market already crowded with strong rollups, while Bitcoin has no real rollup ecosystem yet. BOB's hybrid design, he explained, combines a ZK rollup on Ethereum with Bitcoin security inherited through staking, which allows a trust-minimized bridge. At the time of recording, that design was live on testnet, and Alexei argued it could make Bitcoin on a Layer 2 simply "BTC," rather than wrapped Bitcoin.

What Institutions Actually Need

A major thread was what large Bitcoin holders really want. Alexei noted that many institutions don't self-custody, and custodians charge variable fees, so simply holding Bitcoin costs money. Offsetting those costs with yield is attractive, but only if the product can absorb hundreds of millions of dollars and stay put for at least six months. Short-term, incentive-driven opportunities don't work for them.

Seraphim shared ideas he finds promising:

Tokenized custodian receipts, like the institutional products Maple built, so large holders keep custody while putting Bitcoin to work.
Options vaults, where Bitcoin serves as collateral while the vault underwrites volatility.
Structured products and notes built from options, which Seraphim noted are popular on trading desks because they pay out regularly while holding the main asset.

He acknowledged he was running out of ideas, which in itself shows how scarce sustainable Bitcoin yield still is. Alexei added that when BOB began, he had to defend the question of whether people even wanted yield on their Bitcoin. The reality turned out to be the opposite: there is plenty of demand, but yield is hard to find.

The One Missing Piece

Alexei asked to bet on what would finally "break the dam," Seraphim said nearly everything is in place: institutional appetite, infrastructure, and eager capital. What's missing is one scalable source of yield, perhaps an extra couple of percent, that doesn't compress as soon as large amounts arrive.

"I feel like everything's pretty much almost in place... except for like a source of yield that is scalable."

He suggested this could come from transaction fees on a successful Layer 2 with perps trading, or from a structured product built on options.

EVM, Base, and the Bitcoin Brand

On where this capital will land, Seraphim said the large Bitcoin funds he has spoken with are quite comfortable with Ethereum's EVM and a bit more wary of Solana, though that may change over two to three years. On the long-term outlook, he suggested that Ethereum might be having its "Cosmos moment," becoming infrastructure for launching chains, in which case the base asset might matter less, and Bitcoin could become the base asset for DeFi.

Alexei pushed back on Base's distribution advantage. Coinbase is highly opinionated about which assets and partners it supports, he argued, so there is limited room for others. Bitcoin's advantage is its brand:

"Bitcoin has one thing that no other digital asset has, it has the brand."

He pointed to cashback products and neobanks that reward users in Bitcoin and want to put those balances to work, saying that onboarding just one or two such partners could move a BTC Layer 2 from a top ten player to a top three.

Final Predictions

Closing out, Seraphim gave a bullish personal view that Bitcoin could double or even triple by year-end as markets rotate into it (clearly an opinion, not financial advice). Alexei added a practical point: because Bitcoin Layer 2s hold TVL in Bitcoin, a rising BTC price lifts their TVL and their clients' wealth at the same time.

Watch the Full Episode

This recap covers the main threads, but the full conversation goes deeper on tokenized hash rate, the EigenLayer comparison, and BOB's hybrid design. Watch the complete episode of the Bullish on Bitcoin Show with Seraphim here: