Botanix shutdown raises questions about Bitcoin DeFi demand

Botanix, a Bitcoin layer-2 project, announced earlier this month it would shut down after nearly four years of development and about a year on mainnet. The team attributed the closure to insufficient fee revenue despite recording 25 million transactions, 200,000 wallets and tens of millions of dollars bridged into the chain.

The project team wrote that the chain operated as designed but never produced enough fee volume to cover infrastructure costs. Users, the team reported, tended to treat Bitcoin as a store of value and did not move or trade assets frequently enough to generate sustainable fees.

Co-founder Willem Schroe noted Botanix offered competitive interest rates and a security model aligned with Bitcoin. He attributed the project’s commercial challenges to deeper liquidity, wider integrations and stronger user experience on established EVM-based venues that use tokenized Bitcoin.

On-chain data shows roughly $4.12 billion in total value locked across Bitcoin DeFi protocols, compared with about $1.2 trillion for the broader Bitcoin market. A May 2026 analysis estimated roughly $20 billion of Bitcoin is tokenized on EVM chains, under 2% of supply. A 2025 survey of 730 Bitcoin holders found 77% had never used a BTC-focused DeFi platform and 3% incorporated such platforms into their overall Bitcoin strategy.

Andre Dragosch, head of research at Bitwise, argued that Bitcoin’s primary role remains a monetary asset and collateral, and that the case for standalone Bitcoin DeFi execution layers is weaker than proponents expected. He said capital seeking yield has tended to move to tokenized Bitcoin on larger, more liquid venues.

Market participants also pointed to risk perceptions. Many Bitcoin-aligned DeFi stacks require users to bridge Bitcoin into tokenized representations on other chains, introducing bridge and smart contract risks. Justin d’Anethan of Arctic Digital said institutions commonly prefer centralized desks, exchange lending or institutional credit pools for predictable returns, while many retail holders keep Bitcoin in cold storage and do not accept added counterparty risk for modest yields.

Diego Gutierrez Zaldivar, chief executive of RootstockLabs, reported that more than 40% of Bitcoin DeFi activity now runs through his platform and that institutional demand has increased, with funds asking to deposit hundreds or thousands of BTC into Rootstock-based products.

Orkun Mahir Kilic of Chainway Labs argued that cloning EVM DeFi primitives onto Bitcoin may not change user behavior. He said the immediate market for trust-minimized, Bitcoin-native execution layers is institutions and large holders that require custody-agnostic transactions, rather than retail users.

Botanix’s founders described the wind-down as a managed experiment and highlighted user preference for venues with existing liquidity, integrations and user interfaces. They noted that major centralized exchanges and retail fintechs capture a large share of on-chain activity.

On-chain metrics, tokenization estimates and survey results indicate that DeFi activity involving Bitcoin represents a small portion of the overall Bitcoin market and is concentrated in tokenized Bitcoin on larger chains and a limited number of Bitcoin-aligned sidechains.