Unlike proof-of-stake (PoS) blockchains such as Ethereum or Cardano, Bitcoin (BTC) uses a proof-of-work (PoW) model, making traditional staking impossible. However, BTC holders still have several options to earn yield — from centralized lending to layer-2 protocols and tokenized Bitcoin on Ethereum.

Why Bitcoin Can’t Be Staked Like Ethereum

Staking involves locking up crypto assets to validate transactions on PoS networks, earning rewards in return. In contrast, Bitcoin relies on mining — a process where miners solve mathematical puzzles using computational power.

Because Bitcoin has no native staking functionality or validators, yield generation must come from external platforms or through alternative blockchain ecosystems.

Also read: What Is COTI Blockchain? A Scalable DAG-Based Payment Solution for the Internet of Trust

Wrapped Bitcoin (WBTC): DeFi Access Through Ethereum

One of the most popular ways to earn yield on BTC is by using Wrapped Bitcoin (WBTC) — a 1:1 tokenized version of Bitcoin on the Ethereum blockchain. It allows users to participate in Ethereum-based decentralized finance (DeFi) applications such as Aave and Curve.

However, using WBTC carries risks:

• Custodial risk: WBTC is backed by Bitcoin held by a custodian, usually BitGo.
• Bridge risk: Moving BTC across chains involves bridges, which have been targets for exploits.
• Smart contract risk: DeFi protocols are susceptible to bugs and hacks.

Centralized Lending Platforms: Earn Interest, But with Risk

Platforms like Binance Earn, Nexo, and Ledn offer users fixed or flexible BTC interest accounts. Users deposit BTC, which is lent to institutional borrowers in return for yield.

While convenient, this method is custodial — meaning you give up control of your BTC — and can be risky. The collapse of Celsius and BlockFi underscored how these platforms can fail in volatile markets.

Bitcoin Layer-2 Protocols: Native Yield Without Bridges

Emerging layer-2 networks like Babylon and Stacks offer BTC-native yield mechanisms:

• Babylon: Locks BTC in self-custodial, time-locked scripts to secure its PoS network. BTC remains on the Bitcoin chain.
• Stacks: Uses a Proof-of-Transfer (PoX) system where STX tokenholders lock tokens to earn BTC rewards.

These solutions aim to preserve Bitcoin’s decentralization while expanding its utility — though they are still in early stages and carry protocol risk.

Coinbase Bitcoin Yield Fund: Institutional Yield Exposure

Coinbase launched the Bitcoin Yield Fund (CBYF) in May 2025, targeting 4–8% BTC-denominated returns via arbitrage strategies. It’s available to institutional clients outside the U.S. and avoids high-risk lending or derivatives exposure.