Cryptocurrencies will be in the spotlight this week as the market focuses on the ongoing trade talks between the U.S. and China, new consumer inflation data, and the Consensus event in Toronto. The crypto market enters the week on a…

Top cryptocurrencies to watch this week: Ethereum, Pi Network, Solayer

The temporary tariff reduction may ease economic tensions, but the long-term 
resolution of US-China trade issues remains uncertain.
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US and China agree to temporarily lower tariffs, set clock for negotiations

## Key takeaways
 * Though Bitcoin doesn&#8217;t support native staking, holders can earn yield through centralized lending platforms, Wrapped Bitcoin (WBTC) on Ethereum, and Bitcoin-related networks like Babylon and Stacks.
 * WBTC allows BTC holders to participate in lending, liquidity pools and yield farming on Ethereum-based DeFi platforms like Aave and Curve but introduces bridge and smart contract risks.
 * Protocols like Babylon and Stacks use mechanisms like native time-locked scripts or stacking to offer rewards without removing BTC from the Bitcoin blockchain.
 * Custodial, smart contract and regulatory risks persist. Bitcoin&#8217;s community also remains divided on whether Bitcoin yield generation features align with its decentralized and trust-minimized ethos.
Unlike proof-of-stake (PoS) blockchains like Ethereum or Cardano, Bitcoin 
relies on proof-of-work (PoW) mining for network security. However, with the 
rise of decentralized finance (DeFi) and layer-2 innovations, Bitcoin (BTC) 
holders can now generate passive income through various yield-generating 
methods. These include centralized lending, Wrapped Bitcoin (WBTC) on 
Ethereum, and layer-2 solutions like Babylon and Stacks.
This article explores how to earn yield on BTC, the risks involved and the 
technological advancements enabling these opportunities, all without altering 
Bitcoin&#8217;s core protocol.
## Staking vs. mining
Staking and mining are two distinct consensus mechanisms used to secure 
blockchain networks and validate transactions.
Staking is central to PoS blockchains like Ethereum and Solana. Participants 
lock up cryptocurrency to become validators, who are randomly selected to 
create new blocks and confirm transactions, earning rewards. The more coins 
staked, the higher the chance of selection.
Mining, used by PoW blockchains like Bitcoin and Litecoin, involves miners 
solving complex mathematical puzzles with powerful computers. The first to 
solve the puzzle adds a new block and receives a reward. Mining demands 
significant energy and hardware.
Bitcoin&#8217;s PoW design means it does not support staking. The network relies 
entirely on miners to ensure decentralization and security. There are no 
validators or staking rewards in the traditional sense. Yield-generating 
methods for BTC, such as lending or layer-2 solutions, are not equivalent to 
PoS staking.
_**Did you know?**__Some staking platforms offer liquid staking, where you get 
a token representing your staked asset (like stETH for Ether). This lets you 
earn staking rewards and still use your capital in DeFi protocols._
## Ways to earn yield on Bitcoin
While you cannot natively stake BTC due to its PoW mechanism, there are 
alternative methods to help you earn yield on your BTC holdings and make 
passive income. These methods often involve using third-party platforms or 
bridging BTC to other blockchains.
### Centralized lending platforms
Centralized lending platforms like Binance Earn, Nexo and Ledn enable you to 
earn with BTC deposited, which the platform lends to institutional borrowers. 
In return, you receive interest, which might be paid daily or monthly. But 
this method involves custodial risk, as users must trust the platform to 
remain solvent and secure. The collapse of firms like Celsius and BlockFi has 
highlighted this vulnerability.
### WBTC on Ethereum
WBTC is an ERC-20 token backed 1:1 by BTC, held by a centralized custodian 
(BitGo). It enables BTC holders to engage in Ethereum-based DeFi protocols, 
such as lending on Aave, providing liquidity on Curve or yield farming. This 
unlocks DeFi&#8217;s potential but introduces risks from BitGo&#8217;s custody, bridge 
vulnerabilities and smart contract bugs.
### Bitcoin layer-2 platforms
Emerging layer-2 platforms such as Babylon and Stacks also enable you to 
explore Bitcoin-native yield opportunities. Babylon locks BTC in time-locked 
scripts to secure its PoS network, while Stacks uses a proof-of-transfer (PoX) 
model where STX tokenholders lock tokens to earn BTC rewards. These platforms 
expand Bitcoin&#8217;s utility without leaving its ecosystem entirely.
_**Did you know?**__Ethereum became the largest PoS network in 2022 after &#8220;the 
Merge,&#8221; replacing miners with validators. This move reportedly reduced the 
blockchain&#8217;s energy consumption by over 99.95%, making it one of the greenest 
major crypto networks._
## How to earn yield with BTC on a centralized lending platform
Earning yield on BTC via centralized platforms is straightforward. Choose a 
reputable platform, create a verified account, deposit BTC, select a flexible 
or fixed-term lending option, confirm terms, and monitor earnings. Funds can 
typically be withdrawn after the term.
Using Binance Earn as an example, the platform offers multiple yield options:
 * **Simple Earn:** Beginner-friendly, offering stable yields through flexible or locked savings products.
 * **Dual Investment:** Higher-risk, with returns based on the settlement price of two assets, exposing users to market volatility.
 * **On-chain Yield:** Bridges funds to DeFi protocols like Aave, with variable yields managed by Binance.
Yields and terms vary by option and market conditions. Simple Earn offers 
lower, predictable returns with flexible withdrawals, while Dual Investment 
and On-chain Yield may yield higher but riskier returns with locked terms. 
Check Binance Earn for current rates.
After subscribing:
 * **Simple Earn:** BTC is locked (fixed term) or withdrawable (flexible term), with interest paid daily or at term&#8217;s end.
 * **Dual Investment:** Funds are committed to a target price and settlement date, with yields paid in the deposited or alternative asset.
 * **On-chain Yield:** Funds are deployed to DeFi protocols, with Binance handling gas fees and smart contracts. Withdrawals may face delays due to liquidity or network issues.
Rewards depend on the platform, BTC amount and program terms.
## How to earn yield with WBTC on Ethereum
WBTC allows BTC holders to earn yield on Ethereum&#8217;s DeFi platforms, such as 
Aave or Curve, by depositing WBTC into liquidity pools and earning interest or 
fees.
Steps to earn yield with WBTC, using Curve as an example:
 * **Convert BTC to WBTC:** Use a centralized exchange (CEX) (e.g., Binance) or decentralized bridge (e.g., RenBridge) to convert BTC to WBTC, custodied by BitGo.
 * **Transfer WBTC to a wallet:** Move WBTC to a Web3 wallet like MetaMask and make sure you have enough Ether (ETH) for gas fees.
 * **Connect to a DeFi protocol:** Visit Curve.fi and deposit WBTC into a liquidity pool via the platform&#8217;s interface.
 * **Earn yield:** By providing liquidity, you earn interest or fees based on pool performance.
## How to earn yield using Bitcoin layer 2s
Layer-2 solutions like Babylon and Stacks enable yield generation by 
leveraging Bitcoin&#8217;s security. Babylon, for example, locks BTC as collateral 
to secure its PoS network, connecting to Cosmos zones (interconnected 
blockchains). Babylon&#8217;s Genesis mainnet launched on April 10, 2025, with over 
57,000 BTC staked, valued at approximately $4.6 billion.
Steps to earn yield with Babylon:
 * **Set up a compatible wallet:** Use a wallet like OKX or Phantom, supporting Native SegWit (bc1q) or Taproot (bc1p) addresses. Avoid wallets with Bitcoin Inscriptions (Ordinals).
 * **Access the Babylon stake app:** Visit the Babylon Stake app, which is active post-Genesis launch.
 * **Connect your wallet:** Link your BTC wallet and approve digital signature requests for platform interaction.
 * **Choose a finality provider:** Select from over 250 finality providers (e.g., Galaxy, Figment) that secure Babylon&#8217;s network.
 * **Set transaction fees:** Choose default or custom fees (higher fees ensure faster confirmation) and enter the BTC amount to lock.
 * **Confirm and monitor:** Lock BTC via the app and track status in the Babylon Staking Terminal. Rewards include BABY tokens, split 50-50 between BTC and BABY stakers.
_**Did you know?**_ _In some countries, crypto yield rewards are taxed as 
income upon receipt and as capital gains when sold. Tax treatment varies, so 
consult a professional._
## Innovative mechanisms in Bitcoin layer-2 protocols
Layer-2 protocols enhance Bitcoin&#8217;s scalability and functionality. Babylon and 
Stacks introduce unique mechanisms to generate yield while leveraging 
Bitcoin&#8217;s security.
### Native time-locked scripts in Babylon Protocol
Babylon locks BTC in self-custodial, time-locked scripts on the Bitcoin 
blockchain, using it as collateral to secure its PoS network, launched on 
April 10, 2025. This non-custodial model supports Cosmos zones without 
requiring bridges or wrapping. BTC stakers delegate to Finality Providers, 
earning BABY tokens, while BABY stakers support block production. This 
trustless system enables delegated voting and restaking across PoS chains.
### Stacking in the Stacks Protocol
Stacking is Stacks&#8217; yield mechanism, using proof-of-transfer (PoX). STX 
tokenholders lock Stacks (STX) for ~2 weeks to support network consensus, 
earning BTC rewards paid by Stacks miners. This non-custodial process, 
available via platforms like Okcoin or Xverse, creates an economic link to 
Bitcoin without locking BTC itself.
## Coinbase Bitcoin Yield Fund (CBYF) Explained
Coinbase Asset Management has launched the Coinbase Bitcoin Yield Fund (CBYF) 
on May 1, aiming to deliver sustainable Bitcoin-denominated returns for 
institutional investors outside the US.
The fund uses a conservative cash-and-carry arbitrage strategy, capitalizing 
on price gaps between spot and futures markets, while steering clear of high- 
risk tactics like leveraged loans or call selling.
Targeting annual net returns of 4-8% in BTC, CBYF offers a safer alternative 
for earning yield on Bitcoin &#8212; an asset that lacks native staking options 
unlike other cryptocurrencies.
## Risks involved in earning yield with BTC
Generating yield on BTC involves risks distinct from PoS staking due to 
reliance on third-party services or layer 2s:
 * **Custodial risk:** Centralized platforms (e.g., Binance, Nexo) and WBTC&#8217;s custodian (BitGo) hold BTC, risking losses if they face insolvency, hacks or regulatory shutdowns.
 * **Smart contract risk:** WBTC bridges and DeFi platforms like Aave are vulnerable to bugs or exploits.
 * **Liquidity risk:** Locked BTC in fixed-term programs or low-liquidity pools may be inaccessible during market shifts.
 * **Network maturity:** Newer protocols like Babylon may face technical or adoption challenges.
 * **Market risk:** Price volatility can offset yield during bear markets.
 * **Regulatory risk:** Centralized platforms and custodians face Know Your Customer (KYC) and Anti-Money Laundering (AML) scrutiny, and yield may be taxed as income or capital gains, depending on jurisdiction. 
## How earning yield with BTC may evolve
Bitcoin&#8217;s yield landscape is evolving through layer-2 and DeFi innovations. 
Babylon and Stacks pioneer trustless solutions, locking BTC or STX without 
centralized custodians. Future advancements may include more non-custodial, 
Bitcoin-native systems using cryptographic tools to unlock value while 
preserving Bitcoin&#8217;s censorship resistance.
However, purists argue that yield generation risks diluting Bitcoin&#8217;s role as 
hard money, sparking debates over balancing utility and security.
This article does not contain investment advice or recommendations. Every 
investment and trading move involves risk, and readers should conduct their 
own research when making a decision.

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