Bitcoin, the leading cryptocurrency, is recognized as a store of value and ranks among the world's top 10 most valuable assets. Bitcoin has definitely grown in prominence, though a majority of it is still dormant. Early 2025 will see more than 62% of the current active supply with a lack of movement in over a year. This otherwise dormant Bitcoin is an untapped source of financial opportunity. Decentralized finance (DeFi) platforms are just starting to tap it, most recently through innovative mechanisms such as restaking.
Restaking is quickly becoming another route to bring Bitcoin into DeFi, while supporting its long-held image as a stronghold for an investment safe haven. Because of this, the new model provides a unique opportunity for Bitcoin holders to earn passive income by directly supporting the economic security of the network. Specifically, as of March 10, the total value locked (TVL) of Bitcoin in DeFi went over $5 billion, per DefiLlama data. This figure is still only a drop in the bucket compared to Bitcoin’s total circulating supply.
The Untapped Potential of Dormant Bitcoin
All that previously-unmoved Bitcoin adds up to an impressive new wave of liquidity in the DeFi ecosystem. KernelDAO’s co-founder and CEO Amitej Gajjala emphasized this possibility.
"Today’s decentralized finance (DeFi) tools, however, enable yield gain by holding Bitcoin and taking advantage of dormant Bitcoin, which just sits in investors’ wallets and does nothing. This idle Bitcoin has an enormous amount of untapped financial potential." - Amitej Gajjala, co-founder and CEO of KernelDAO
Wrapped tokens and crosschain bridges have created new and exciting experiences for Bitcoin holders. Today, they can engage in flash loans, lending, staking, restaking and yield farming on DeFi protocols. Today’s levels are not enough to reap the maximum benefits from this tidal wave of liquidity.
Gajjala believes that only a small percentage of the current dormant Bitcoin would be needed to radically change the state of DeFi.
"If Bitcoin became the new king of TVL in DeFi, it would only need to use some of the dormant Bitcoin mentioned above. With that amount of active liquidity, Bitcoin would not only be a “store of value” but also a productive asset with utility and application." - Amitej Gajjala, co-founder and CEO of KernelDAO
Restaking: A Conservative Approach to DeFi
Restaking fits nicely with the conservative mindset of many Bitcoin holders. It allows them to participate in all DeFi innovations but remain aligned with their investment mandates and philosophy. This mechanism turns real estate dollars into predictable passive income with little risk. It encourages the creation of new products, just like classic finance does, by providing reliable returns and helping protect your principal.
"Restaking aligns with the conservative mindset typical among many Bitcoin holders, allowing them to participate in innovations within the DeFi space." - Amitej Gajjala, co-founder and CEO of KernelDAO
Holders can earn passive income by staking their assets in decentralized protocols. This too goes a long way in bolstering the network’s economic security. This can create tremendous advantages for individual investors. In addition, it enhances the stability, liquidity, and growth potential for the larger DeFi ecosystem.
Government Bitcoin Reserves and DeFi Opportunities
Additionally, the US government is currently sitting on an estimated 198,000 BTC in reserve, creating a novel opportunity for using dormant Bitcoin. Gajjala argued that the government’s overall approach of keeping all of these budget-neutral strategies without monetizing or selling these reserves is a natural fit with restaking.
"Let’s look at the announcement of the creation of a Bitcoin strategic reserve in the United States. One of the key points of this reserve is that it will follow budget-neutral strategies without selling the estimated 198,000 BTC held by the government. Those conditions are perfect for putting this Bitcoin into restaking and using it in DeFi to obtain rewards." - Amitej Gajjala, co-founder and CEO of KernelDAO
Through simply restaking, the US government might make a significant profit without needing to sell their Bitcoin.
"Just picture all the gains the US could make by using most of its Bitcoin reserves in that way, without selling." - Amitej Gajjala, co-founder and CEO of KernelDAO
