As the Dubai Token2049 conference concludes, one of the key takeaways is that the narrative around bitcoin (BTC) is swiftly expanding beyond its traditional role as a store of value to a potential DeFi asset competing with Ethereum and Solana.
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Prominent industry players like Franklin Templeton view this development as a positive step, confident it will enhance bitcoin’s utility without diluting its core appeal as a store of value as purists or maximalists fear.
“I don’t think focusing on Bitcoin DeFi will dilute or complicate Bitcoin’s core narrative,” Kevin Farrelly, managing principal of blockchain venture capital at Franklin Templeton and VP of Digital Assets, explained during his keynote speech at the Bitlayer side event this week. “Instead, it expands Bitcoin’s utility for a specific type of investor — one with enough technical sophistication to optimize for yield, security, or custom portfolio needs.”
“These users aren’t replacing the ‘store of value’ thesis; they’re building on it,” Ferally added. “It’s not narrative dilution, it’s infrastructure evolution.”
Franklin Templeton is an investor in Bitlayer, a BitVM that serves as Bitcoin’s computational layer while preserving the mainnet’s security. It offers features such as faster transaction processing, lower fees, and new functionalities like smart contracts or advanced DeFi integrations, areas that base-layer Bitcoin alone doesn’t natively support.
Franklin Templeton’s bitcoin ETF (EZBC) has registered net inflows of $260 million since its debut on Jan. 11 last year. As of May 1, the fund held 5,213 BTC, more than $500 million in assets under management at bitcoin’s current price just above $97,000.
Expanding beyond the store of value appeal
Satoshi Nakamoto’s original vision for the Bitcoin blockchain was driven by creating a decentralized financial system that promotes financial sovereignty and privacy, eliminating the need for transaction intermediaries. Over a decade since its inception, however, the blockchain’s native cryptocurrency, bitcoin, has quickly garnered a reputation as digital gold — a reliable store of value — and this narrative has served it well.
Bbitcoin’s market cap today exceeds $1.9 trillion, accounting for nearly 60% of the total digital asset market value of $3.12 trillion, per CoinDesk data. It’s the most liquid cryptocurrency, averaging several billion dollars in daily trading volumes worldwide, and several publicly listed companies have adopted it as a reserve asset.
Moreover, several regulated alternative investment vehicles tied to BTC have emerged over the years, allowing traditional market participants to take exposure to the cryptocurrency.
For instance, according to data source Farside Investors, the 11 spot ETFs listed in the U.S. have amassed nearly $40 billion in investor money since their debut in January last year. Meanwhile, ether ETFs have seen net inflows of just under $3 billion.
The strong institutional uptake for BTC has been widely attributed to its simple, compelling narrative as digital gold —a n asset that’s easy to understand relative to complex platforms like Ethereum or Solana, which support a wider array of decentralized finance (DeFi) applications and use cases, helping their native token holders earn additional yields on top of their spot market holdings.
“At its core, it’s seen as a digital store of value,” Farrelly told CoinDesk. “Unlike more complex crypto projects, Bitcoin doesn’t require deep technical explanation — it has a clear, focused purpose. That clarity may be part of what makes it easier to understand, easier to model, and with the ETF, easier to allocate.””In a landscape full of complexity and speculative narratives, Bitcoin offers a kind of signal — and that, increasingly, seems to resonate,” he continued..
As a result, many purists resist the idea of introducing features similar to DeFi directly on the Bitcoin blockchain, fearing it could dilute bitcoin’s core appeal.
The buzz around Bitcoin DeFi at the Bitlayer event and the main Token2049 conference was tangible, highlighting the growing demand among BTC holders for additional yield opportunities.
“Bitcoin DeFi with trust minimized bridge, sustainable yield products for onchain Bitcoin holders is becoming very important for Bitcoin asset holders and the network maintainers,” Charlie Yechuan Hu, co-founder of Bitlayer told CoinDesk.
“At Bitlayer we are building important infrastructures which can empower the Bitcoin DeFi with our BitVM technologies,” Hu added. “A lot of interesting Bitcoin DeFi use cases can make Bitcoin assets more valuable, give users more reason to hold and use in the future”
This BTC DeFi trend could also benefit miners, who are rewarded for mining blocks. While the per-block reward is halved every four years, increased on-chain activity driven by DeFi applications could help offset this reduction through higher transaction fees, supporting the network’s security and sustainability.
“Importantly, Bitcoin DeFi also introduces new transaction fees — a critical component for the network’s long-term sustainability and security as block rewards continue to decline,” Farrelly said.
Hu voiced a similar opinion, saying the rising network hashrate means miners need more activities – like Bitcoin DeFi – to remain profitable.
“We would need to build good Bitcoin Rollup with security verification capacity which can contribute fees back to Bitcoin,” Hu noted.
