Botanix Shutdown Exposes Weak Demand for Bitcoin DeFi

Bitcoin-based decentralized finance, once touted as a major growth area, is still drawing only limited demand, according to an industry assessment. The issue has come back into focus after Bitcoin layer-2 project Botanix shut down, citing a lack of users.

Cointelegraph reported on June 26 that Botanix ended its service after about four years of development and one year of mainnet operations because user demand was too weak. Over that period, the project processed about 25 million transactions, attracted more than 200,000 wallets and bridged tens of millions of dollars of Bitcoin. Even so, it failed to generate enough fee revenue to cover network operating costs.

Botanix said users were interested in high yields, but largely stopped at depositing Bitcoin as collateral and holding it for the long term. Lending, trading and asset transfers did not become active enough to produce a sustainable revenue model.

Willem Schroé, a Botanix co-founder, said the project offered industry-leading yields and a Bitcoin-friendly security model, but users still chose Ethereum-based wrapped Bitcoin, or wBTC. The key differences were deeper liquidity, a better user experience and a longer operating history.

The Bitcoin DeFi market also remains small. Data from DefiLlama show total value locked in Bitcoin DeFi at about $4.12 billion. That remains minimal compared with Bitcoin's market capitalization, spot exchange-traded funds and corporate holdings.

Actual usage is also limited. In a survey of 730 Bitcoin holders conducted by GoMining last year, 77% said they had never used Bitcoin DeFi. Only 3% said it was 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 a standalone DeFi execution layer, however, has been far weaker than the market expected.

Still, some in the industry say Bitcoin DeFi's growth potential has not vanished entirely. Diego Gutierrez Zaldivar, chief executive officer of RootstockLabs, said demand could expand if the trust and risk-management framework sought by institutional investors is put in place. He added that inquiries continue from institutions looking to deploy capital ranging from hundreds to thousands of BTC.

Orkun Mahir Kılıç, a 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.

Botanix's case is viewed less as a failure of Bitcoin DeFi itself than as evidence that the market still sees Bitcoin primarily as a store of value. Broader adoption, industry participants say, will require more than copying the Ethereum ecosystem. Bitcoin DeFi will need use cases and differentiated services built specifically for Bitcoin.