Botanix Shutdown Exposes Thin Demand for Bitcoin DeFi

Bitcoin-based decentralized finance, once touted as a major new growth area, is still drawing limited demand, underscoring structural constraints in the sector after Bitcoin layer-2 project Botanix shut down because of a lack of users.

Cointelegraph reported on June 26 that Botanix ended operations after about four years of development and one year of mainnet service. The project logged about 25 million transactions and more than 200,000 wallets during its mainnet run, while bridging tens of millions of dollars of Bitcoin. Even so, it did not generate enough fee revenue to cover network operating costs.

Botanix said users were drawn to high yields, but activity largely stopped at depositing Bitcoin as collateral and holding it for the long term. Borrowing, trading and asset transfers never became active enough to create a sustainable revenue model.

Willem Schroé, Botanix's co-founder, said the project offered industry-leading yields and a Bitcoin-friendly security model. Users still opted for Ethereum-based wrapped Bitcoin, or wBTC, because of deeper liquidity, a better user experience and a longer operating history.

The Bitcoin DeFi market remains limited in size. DefiLlama data show total value locked in Bitcoin DeFi at about $4.12 billion, a small figure compared with Bitcoin's market capitalization, spot exchange-traded funds and corporate holdings.

Actual usage is also low. In a survey of 730 Bitcoin holders conducted last year by GoMining, 77% of respondents said they had never used Bitcoin DeFi. Only 3% said they used it as part of their investment strategy.

Andre Dragosch, head of research at Bitwise Europe, said Bitcoin remains overwhelmingly competitive as a store of value and collateral asset. Demand for Bitcoin as an independent DeFi execution layer was far weaker than the market had expected.

Still, some in the industry say Bitcoin DeFi's growth potential has not vanished. Diego Gutierrez Zaldivar, chief executive officer of RootstockLabs, said demand could expand if the market builds the trust and risk-management framework institutional investors require. Inquiries are continuing from institutions looking to deploy capital in the hundreds to thousands of BTC, he said.

Orkun Mahir Kılıç, co-founder of Chainway Labs, said simply transplanting Ethereum DeFi onto Bitcoin will not be enough to attract users. Institutions want security, while retail users need new services they cannot find elsewhere before they will adopt it.

Botanix's shutdown is being viewed less as a failure of Bitcoin DeFi itself than as a sign that the market still sees Bitcoin primarily as a store of value. For broader adoption, the industry will need Bitcoin-specific use cases and differentiated services rather than a simple copy of the Ethereum ecosystem.