Digital asset service provider BitGo has launched support for the Stacks blockchain to enhance Bitcoin functionality, the latest sign of institutional adoption for Bitcoin-native decentralized finance.

BitGo’s integration of Bitcoin l ayer-2 (L2) network Stacks will enable the platform’s users to earn Bitcoin ( BTC ) rewards through “stacking,” a process that allows Stacks ( STX ) holders to generate native BTC yield directly in their wallet, without having to lend or expose the assets to additional risks.

The new partnership highlights Bitcoin’s continued institutional adoption, according to Kyle Ellicott, the ecosystem investor lead at Stacks. He wrote:

“Allowing institutions to earn native Bitcoin yield with their STX is a huge step for Bitcoin as part of Bitgo’s goal to put institutional capital to work with DeFi and staking. Making Bitcoin a productive asset is crucial for Bitcoin to succeed long term as rails for a decentralized economy.”

The integration could offer Bitcoin holders a new way of interacting with decentralized finance (DeFi) protocols, especially for Bitcoiners who abstained from DeFi protocols due to the risks associated with smart contracts and proof-of-stake (PoS) protocols.

Total value locked in Bitcoin L2s. Source: DefiLlama

Stacks is recognized as Bitcoin’s smart contract layer and ranks the fifth-largest Bitcoin layer-2 solution. It has over $95 million in total value locked (TVL), accounting for a 7.9% market share among all Bitcoin layer-2 solutions, according to DefiLlama.

Related: Binance-backed pSTAKE Finance launches Bitcoin liquid staking solution

BitGo will support sBTC as a network Signer

As part of the new partnership, BitGo will support the new Stacks token standard (sBTC) and become a "Signer" on the network in order to contribute to block production and consensus.

This will occur after the full release of sBTC, which is a non-custodial, 1:1 Bitcoin-backed asset designed to boost the programmability of the world’s first blockchain network. As a Signer, BitGo will also help facilitate deposits and withdrawals for sBTC as well as the conversion of BTC to sBTC across L1s and L2s .

Other sBTC signers include Figment, Blockdaemon, Near Foundation, Luganodes, and Chorus One.

Stacks’ sBTC aims to make it easier for developers to build DeFi applications on the Bitcoin network.

sBTC use cases. Source: Sbtc.tech

Stacks has yet to activate its Nakamoto Release, to pave the way for sBTC and 100% Bitcoin finality. The release was initiated on April 22 and the activation is expected to occur on Aug. 28, according to Stacks’ roadmap .

sBTC and Nakamoto roadmap. Source: Stacks

Related: Stacks active accounts reach record high amid growing interest in Bitcoin DeFi

Nakamoto will usher in a “renaissance” for Bitcoin DeFi

The partnership marks a new development for Bitcoin DeFi or BTCFi, an emerging developer movement that aims to add more utility to the Bitcoin network.

Notably, the full activation of Stacks’ Nakamoto release will usher in a renaissance for Bitcoin DeFi, according to Stacks’ Ellicott, who wrote:

“Stacks will inherit 100% of Bitcoin's security budget, making transactions as irreversible as Bitcoin and enabling sBTC to facilitate decentralized BTC movement into the L2. This release will begin another renaissance of new Bitcoin builders, technical upgrades, and growth in user interest, providing a promising spotlight for the future of Bitcoin DeFi.”

Bitcoin DeFi introduces revolutionary new products for the crypto space, including the first-ever Bitcoin-backed synthetic dollar with yield-generating capabilities. Hermetica’s Bitcoin-based synthetic dollar, USDh, debuted in June, with a 25% annual percentage yield (APY), which is derived from futures funding rates.

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