As the field of decentralized finance (DeFi) continues evolving, Bitcoin’s role within it is being quietly (or not so much) redefined. While the primary cryptocurrency has long stood (and perhaps, continues to) as a passive store of value, newer frameworks like restaking protocols are emerging to unlock its tremendous economic potential without altering its base-layer integrity.

In this exciting interview with Luke Xie, the co-founder and CEO of SatLayer, we explore how the concept of Bitcoin restaking could reshape its utility across DeFi.

From programmable slashing logic to multi-chain security coordination, however, restaking presents both technical hurdles and considerable opportunities. So stay tuned and let’s dive right into it.

What role do you think the Bitcoin Reserve in the US will play in decentralized finance?

The U.S. Bitcoin Reserve symbolizes mainstream validation of Bitcoin’s long-term value. While it may not directly participate in DeFi, its existence underpins trust in Bitcoin as a pristine, censorship-resistant collateral asset. This trust creates a stronger foundation for decentralized finance built on Bitcoin. The more confidence institutions and sovereign entities have in BTC, the more likely DeFi protocols are to adopt it as a core asset — unlocking composability, liquidity, and programmability that respects Bitcoin’s ethos.

What are the biggest technical challenges in bringing restaking to Bitcoin?

Xie summarized the challenges into three main groups.

Slashing programmability across diverse BVSs

Unlike traditional staking, which is typically binary (you either sign correctly or not), restaking introduces service-specific enforcement. Each BVS — whether it’s an oracle, bridge, DEX, or rollup — has its own definition of misbehavior. The challenge lies in designing slashing logic that is not only programmable and verifiable, but also flexible enough to adapt to the needs of each individual service.

Secure multi-BVS coordination

Operators often secure multiple BVSs at the same time, each with its own rules and risk parameters. Ensuring that slashing and reward logic is correctly isolated or cross-enforced — without compromising security or fairness — is a critical part of restaking infrastructure design.

Vault design and isolation guarantees

Restakers deposit BTC LSTs into vaults that connect to one or more BVSs. Each vault inherits that service’s specific slashing conditions and risk exposure. The challenge is ensuring restakers have full visibility into what risks they’re opting into, with clearly encoded slashing logic, predictable withdrawal flows, and transparent grace period mechanics.

What advantages does Bitcoin restaking offer compared to traditional staking in proof-of-stake ecosystems?

Bitcoin’s market cap is at $2.1T (as of May 23, 2025) and yet over 90% of Bitcoin sits idle — stored but unused, with its economic potential untapped. Restaking changes that. It transforms BTC from passive capital into productive, yield-generating collateral, unlocking powerful economic utility without altering Bitcoin’s base layer.

Bitcoin restaking pairs BTC’s unmatched economic credibility with a fee-based, utility-driven yield model. Unlike traditional proof-of-stake systems that rely on inflationary emissions and dilute token holders, Bitcoin restaking is built on real services and real demand.

Restaked BTC is used to secure Bitcoin Validated Services (BVSs) — decentralized use-cases like on-chain insurance coverage and liquidity float provisioning — that generate protocol-level fees from day one. This means restakers earn sustainable, non-inflationary yield based on the actual economic value they contribute, not just for locking up capital.

With SatLayer, restaked BTC doesn’t just secure a single chain — it can support a modular, multi-chain ecosystem, from rollups and bridges to oracles and appchains. Restakers gain exposure to multiple sources of real yield without being tied to any one protocol’s inflation schedule.

What does a “productive BTC” world look like in the next 2–3 years, and what needs to happen to get there?

A “productive BTC” world is one where Bitcoin is no longer just a passive store of value — it’s actively securing decentralized systems, earning real yield, and serving as pristine collateral across DeFi and real-world applications.

In this future, BTC is restaked to secure critical infrastructure like oracles, rollups, bridges, and appchains. The rewards aren’t driven by inflation or speculative tokenomics, but by delivering tangible, economically valuable security to networks that need it. The yield is real — paid by users and applications that derive genuine utility and trust from Bitcoin’s economic weight.

At the center of this transformation is SatLayer — the protocol that connects BTC holders, emerging protocols, and real economic activity.

To make this future a reality, SatLayer is, from day one, onboarding Bitcoin Validated Services (BVSs) — revenue generating decentralized services that rely on Bitcoin-backed restaking to function securely — in order to generate sustainable, real, protocol-level fees. 

This design promotes a crucial mindset shift: BTC holders are no longer just “hodling” — they’re empowered to put their assets to work and earn sustainable, ecosystem-driven yield.

As this takes hold, it sets off a self-sustaining, incentives-aligned flywheel:

1. BTC enters productive restaking  via SatLayer.
2. Protocols gain Bitcoin-backed security, boosting their credibility and resilience.
3. Restakers earn real sustainable yield, increasing Bitcoin’s utility and appeal.
4. That yield attracts more BTC into the system, amplifying its security guarantees.
5. More projects choose to build on Bitcoin-backed security, unlocking even more yield opportunities.

With SatLayer as the foundation, BTC evolves from digital gold into the economic engine of a secure, decentralized future.

How is SatLayer approaching security and slashing risks in a modular, multi-chain restaking model?

Built with a security-first mindset, SatLayer’s core infrastructure undergoes quarterly third-party audits by leading security firms, along with continuous testing and formal verification of critical components.

But SatLayer’s real innovation lies in how it handles risk: through programmable, application-specific slashing. Unlike traditional staking models with one-size-fits-all penalties, SatLayer enables each Bitcoin Validated Service (BVS) to define its own slashing logic — customized to its specific use case, security requirements, and threat model.

Example: In the context of an on-chain coverage BVS, Bitcoin restakers provide security guarantees for underwriting smart contract risk or protocol failures. In the event that an insured protocol fails — due to a hack, smart contract bug, liquidation shortfall, or depeg — programmable logic can trigger a slash and initiate payouts. Essentially, BVSs act as decentralized claims adjudicators — ingesting on-chain events, oracle data, and even off-chain proofs to verify claims and execute coverage.

This modular, opt-in security model ensures that Bitcoin restakers are only ever exposed to risks they explicitly accept, with full visibility into each BVS’s slashing logic and parameters before delegating capital.

By combining audit-grade infrastructure with programmable risk management, SatLayer brings Bitcoin-grade assurance to a dynamic, restaking environment — all while preserving sovereignty and minimizing unintended exposure.

How can Bitcoin’s credibility and SatLayer’s infrastructure help rebuild trust in decentralized finance?

The 2022–2023 wave of DeFi failures exposed the dangers of over-financialization and opaque, mispriced risk. Bitcoin offers a counterweight — with monetary clarity, fixed supply, and a neutral, non-inflationary baseline.

And SatLayer extends that clarity into DeFi.

By enabling BTC to secure protocols through restaking — in a transparent, opt-in way — it replaces governance-heavy systems with code-enforced trust.

When decentralized services are underpinned by Bitcoin’s credibility and SatLayer’s modular, verifiable economic layer, they gain stronger guarantees, are fundamentally more resilient — and become more aligned with the original values of decentralization: trustless execution, transparent logic, user sovereignty, and censorship resistance.

What’s a major misconception the crypto community has about Bitcoin’s potential role in DeFi?

A major misconception in the crypto community is that Bitcoin can’t play an active role in DeFi — that it’s only useful as a passive store of value, not as programmable collateral.

This belief stems from Bitcoin’s deliberately minimal scripting model and the absence of native smart contracts. As a result, many assume that BTC must be wrapped, bridged, or fundamentally compromised to participate in decentralized applications.

But that’s changing.

Protocols like SatLayer challenge this assumption head on — introducing restaking and slashing mechanisms that extend Bitcoin’s utility without sacrificing its core principles. Through opt-in vaults, verifiable operator behavior, and programmable economic enforcement, Bitcoin can now provide real, cryptoeconomic security to services like oracles, insurance, bridges, and liquidity layers — without being bridged or reissued.

The real misconception is underestimating how far credibility, transparency, and programmable enforcement can go when composed with intention.

With a modular framework like SatLayer, Bitcoin transforms from passive digital gold into an active foundation for a new financial economy — one that’s secure, programmable, and trustless by design.

Disclaimer: The content shared in this interview is for informational purposes only and does not constitute financial advice, investment recommendation, or endorsement of any project, protocol, or asset. The cryptocurrency space involves risk and volatility. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. This interview was conducted in cooperation with SatLayer, who generously shared their time and insights. The content has been reviewed and approved for publication in mutual understanding. Minor edits have been made for clarity and readability, while preserving the substance and tone of the original conversation.