Three ways to boost your Bitcoin bags.
With Bitcoin reinforcing its position as one of the world’s top assets by market capitalisation (currently the eighth-largest), many savvy investors are exploring viable ways to earn passive income on it, particularly for medium- to long-term holdings of BTC.
While Peercoin is credited as being one of the first cryptocurrencies to implement proof-of-stake (PoS) in 2012, under its hybrid Proof-of-Work (PoW)/PoS setup, the idea of staking your crypto started gaining traction around 2018–19, when Tezos, Cosmos, Algorand, and Cardano rolled it out on their networks.
One of the minor downsides to Bitcoin is that, unlike ETH, BNB, ADA and other major altcoins, it doesn’t offer native staking, as it relies on PoW, i.e., mining, to help secure its network and propose blocks.
Bitcoin “staking” is gaining interest among retail and institutional investors.
However, there has been a growing push in recent years to find viable workarounds, three of which come to mind.
Option #1: Wrapped versions of Bitcoin
Before continuing, what is a wrapped token?
It is a digital asset that is usually pegged to an asset’s price 1:1, allowing people to use something that mimics BTC (or ETH and other altcoins) on different chains.
Taking a page out of the Ethereum staking playbook, options such as Wrapped Bitcoin (WBTC) and Coinbase Wrapped Bitcoin (cbBTC) are among the most popular choices.
These are ERC-20 tokens, i.e., Ethereum-native assets, and have the 1:1 price peg within a margin of ±0.0005 BTC.
As many decentralised finance (DeFi) lending protocols are built on Ethereum, you can use an asset related to BTC, but one that operates on platforms built on or compatible with Ethereum’s network.
These ETH tokens are compatible with most DeFi protocols, unlike using BTC directly. Over the past year or two, these wrapped assets have expanded to L2s and other EVM-compatible chains for even more programmability.
It is designed to facilitate greater liquidity between BTC and ETH through these intermediary/bridging tokens. It helps boost Bitcoin’s presence on decentralised exchanges and other parts of DeFi, many of which still primarily or exclusively feature ETH and its tokens.
Having these wrapped BTC tokens also allows you to earn passive income through staking, lending, and creating a secondary set of wrapped tokens (akin to “double dipping” in rewards), which come with their own additional set of counterparty, centralisation and other risks.
You can switch from BTC to WBTC and lend the latter through automated market makers (AMMs), such as Aave, which allows peer-to-peer (P2P) lending and borrowing of other assets across multiple networks, not just ERC-20 tokens.
A run-down of how Wrapped Bitcoin works is available on its website and its whitepaper.
The launch of BitcoinOS, an L2 that runs directly on Bitcoin’s blockchain, alongside other L2S in future, will further enhance programmability by running smart contracts on Bitcoin-native L2s rather than relying on wrapped tokens on Ethereum, its own L2s, or Solana.
Option #2: Rewards issued with a separate token
Earlier this year, Kraken added BTC to its list of assets eligible to receive earn rewards, mostly through staking.
Users can earn a modest 1% per year paid out in $BABY* tokens by staking Bitcoin via Babylon on Kraken.
*Of all names, they picked this one.
Nexo is another company offering a “staking” service for Bitcoin by using a synthetic BTC token, i.e., one that follows the price of BTC. It provides daily payouts without a lock‑up period, presenting a flexible option while you keep control of the underlying asset.
It reportedly offers up to 7% interest on your BTC. I haven’t used the service, so I can’t vouch for it, and I maintain a neutral stance on this idea. I will delve deeper into this setup in the coming months.
From my understanding, this generous interest rate is partially due to the BTC being loaned to people at a higher rate, especially when there’s strong demand for borrowing Bitcoin.
Strictly speaking, in this case, it’s not about staking; rather, it’s about lending your BTC for passive income. Many have done with WBTC via Aave over the years, and I know Bitstamp allows its clients (in some jurisdictions) to lend their BTC via its centralised exchange.
Option 3: Earn BTC via Stacks
Stacks function as a Bitcoin L2, allowing smart contracts and decentralised apps to interact securely with the Bitcoin blockchain. This is achieved by utilising the Stacks layer’s consensus protocol, Proof of Transfer (PoX), which connects Stacks blocks to Bitcoin and uses its PoW mechanism for security without requiring additional energy consumption.
By locking up the Stacks token, STX, you can earn native BTC coins, no synthetic assets, no wrapped tokens. Visit the Stacks staking page to learn more about this process.
Alternatively, there is the liquid staking option involving Stacks, whereby you earn stSTXbtc, but the focus here is on BTC, not these wrapped assets.
Additional thoughts
If there are reliable, trustworthy ways to boost your Bitcoin holdings and explore methods to make passive income on your crypto assets, I’m all for it.
Over the years, ETH, ADA, BNB, SOL, and other PoS networks have demonstrated that they can safely provide delegators and validators with a consistent stream of staking rewards in increasingly convenient ways, all while maintaining their networks’ security.
However, there are centralisation risks, potential smart-contract vulnerabilities, and ongoing concerns about a few players gaining majority control over stake pools. Mind you, this problem also relates to Bitcoin and other PoW networks.
Additionally, having a handful of wallets with enormous BTC or altcoin holdings is a concern, but that’s a different topic of discussion.
Based on my experience having used Lido Staked ETH (stETH) and Rocket Pool ETH (rETH) since 2022, primarily stETH, I haven’t had any concerns or experienced losses from using these services via hardware wallets, despite any worries about major network bugs.
Thus, I see the benefits outweighing the risks.
During a time with increasing costs of living, greater automation of various sectors and an increasingly competitive job market (at least for the highly sought-after/prestigious roles), it’s become more important than ever to maximise your assets’ potential, Bitcoin, crypto and otherwise.
My approach is to explore these options sooner rather than later. This isn’t just due to the power of compound interest and accumulating more at relatively cheaper prices. It’s also about preparing yourself for the increasing scarcity of BTC, as the block reward halves every 210,000 blocks.
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You might also be interested in these stories:
https://medium.com/@cryptowithlorenzo/bitcoin-is-going-to-zero-5562122f5481
https://cryptowithlorenzo.medium.com/five-crypto-sectors-with-the-most-potential-in-2025-f1fe085564c8
https://medium.com/crypto-insights-au/why-the-big-bucks-will-be-made-with-real-world-assets-rwa-bc8dea8144c2
Disclaimers
• N.B. None of this is financial advice; I am not a financial advisor. You are ultimately responsible for your investments.
• My opinions in this piece may not reflect those of any news outlet, person, organisation, or other entity listed here.
• Please do your due diligence before investing in any crypto assets, staking, NFTs, or other products associated with this space.
Image by EyeEm at Freepik.
Haha, what a treasure trove of wrapped-wrapped-wrapped possibilities! Who knew Bitcoin could dress up for a party on Ethereum, L2s, and even get a synthetic sibling? Its like Bitcoins playing the ultimate DeFi game of Wheres Waldo? But seriously, the idea of double dipping in rewards via wrapped tokens is comedy gold – if the risks dont laugh first! Good on Kraken for the Baby name, though. Classy. And while I wouldnt touch some of these services with a ten-foot wallet (especially that 7% claim sounds like a high-stakes poker game), its fascinating to see Bitcoin trying on all these different digital hats. Just hope the underlying asset doesnt get lost in the translation!