How Bitcoin Layer-2 Core Is Unlocking a New Era of Bitcoin Utility

As Bitcoin begins 2025 with fresh momentum, the ecosystem is rapidly evolving beyond its "digital gold" narrative.

Despite the fact that the Chairs of the Securities and Exchange Commission and the Federal Reserve have both now finally hopped on the "Bitcoin is digital gold" bandwagon, the crypto space is already moving beyond that by exploring what else a "digital gold" could unlock. Projects like Stacks, Babylon, BitcoinOS, and Core have all exploded in mindshare by working to unlock other things to do with Bitcoin besides just HODL.

The growth trajectory for Core, in particular, has been impressive. After starting 2024 with just a few million dollars in Total Value Locked (TVL), the chain now commands nearly $1 billion in TVL. And considering that Stacks, a fellow Bitcoin Layer-2, has also earned finalist honors in our Coinage Crypto Project of the Year series — it would seem as if that momentum for Bitcoin builders is likely to continue this year.

To unpack the impact of these developments, Coinage sat down with Core DAO initial contributor Brendon Sedo, to discuss Core's ambitions and what lies ahead for projects building on Bitcoin.

“We’re seeing liquidity and excitement draw world-class builders to the space every day,” Sedo said, projecting that the space could potentially draw in another 5x in Bitcoin being put to work on Layer-2s this year. As Sedo put it, “This is a huge opportunity to turn Bitcoin into a productive asset while retaining its core principles of security and decentralization.”

Why Build on Bitcoin?

Bitcoin’s reputation as the most secure and decentralized network is uncontested, but its utility has often been constrained by its design. “Bitcoin is a great, decentralized network, but it’s inherently limited in what it can do ... it's unable to do smart contracts or have high throughput,” Sedo explained. That’s where Core and others are looking to step in.

Core is an EVM-compatible scaling layer secured by Bitcoin’s hash power. It enables smart contracts and other functionalities that Bitcoin itself cannot handle. "What we're seeing is you can keep all the great things that make the Bitcoin network great, and now you can enable all these use cases on Core that you've always wanted on Bitcoin but just aren't possible right now," Sedo said. For Bitcoin holders, this means participating in Core without relinquishing custody of their Bitcoin through a novel non-custodial staking mechanism. Then, of course, there's also the ability to earn additional yield.

In the past, centralized lenders like BlockFi and Celsius have proven seeking additional yield on crypto to be an incredibly bad bet (since many when bankrupt and took down customer deposits with them.) But with non-custodial options, the hope is that this could potentially turn out differently. For some Bitcoiners, selling that narrative is still an uphill battle. Author of The Big Bitcoin Book Fred Krueger, for example, is skeptical on the needs.

"There's a lot of people who want to try to tweak a really great thing, and Bitcoin is just great just as it is," Krueger told Coinage. "I'm not saying it'll end badly, but it's sort of an unnecessary thing for most people."

But Core and its peers do appear to be making some headway. According to Sedo, “There's others that are actively looking to turn their bitcoin into a yield-producing asset and something that's working for them."

At the very least, Core’s staking system is unique. It allows users to stake Bitcoin directly on the Bitcoin network via time-locked transactions. “You don’t need to wrap, bridge, or give up custody of your Bitcoin,” Sedo emphasized. By participating in Core’s consensus mechanism, users earn rewards sourced from block subsidies rather than liquidity incentives.

As Bitcoin scaling chains like Core expand, the opportunities for builders and investors multiply. “We think that the TVL, or the the amount of Bitcoin deployed on Bitcoin scaling chains and into different DeFi protocols and being put to work will dwarf Ethereum in the next couple of years," Sedo predicted.

However, to Krueger's point, some of the new Bitcoin experimentation may carry additional risks over just holding. As Sedo warned, “You know, you need to do your own research and and generally be as cautious as you can."

Whether Core’s bold vision for Bitcoin’s utility will fully materialize remains to be seen, but one thing is clear: The era of Bitcoin doing more than just sitting idle is here.