Bitcoin (BTC) Staking Industry Could Grow into a $10 Billion Market by the End of 2025

The Bitcoin BTC/USD staking industry could grow into a $10 billion market by the end of 2025, according to David Tse, co-founder of Babylon Labs

The Bitcoin BTC/USD staking industry could grow into a $10 billion market by the end of 2025, according to David Tse, co-founder of Babylon Labs.

Speaking in an interview with Benzinga on the sidelines at ETH Denver, Tse set out a bullish vision for Bitcoin staking, highlighting its trustless nature and potential for broader adoption across blockchain ecosystems.

With $5 billion in Bitcoin already staked since Babylon's mainnet launch in August 2024, Tse saw ample scope for expansion as the cryptocurrency evolves beyond its store-of-value origins.

"Right now, we have 0.3% of all Bitcoins staked, which is around 56,000 BTC, but I envision that there will still be a lot of potential to increase this amount of Bitcoin staked," Tse said.

Setting a goal to surpass $10 billion by year-end 2025, Tse highlighted the appeal of staking's trustlessness, adding, "there's no third party involved. It's a direct interaction between the staker and Bitcoin chain."

This characteristic, he said, aligns closely with Bitcoin holders' preference for holding over trading, naturally complementing its established role as a store of value.

The growth of Bitcoin staking comes amid broader institutional adoption of cryptocurrencies, a trend Tse linked to macroeconomic shifts and the introduction of Bitcoin exchange-traded funds (ETFs) in early 2023.

He suggested that staking could further amplify institutional interest by presenting yield-bearing opportunities, envisioning potential Bitcoin-staking ETFs.

"Right now Bitcoin doesn't earn any yield. So to make it more appealing to institutional investors, they could make an ETF that also covers the fee and then pay for the staking," Tse said.

This, he explained, would differentiate them from existing non-yielding ETFs, potentially attracting greater interest towards Bitcoin ETFs.

Technologically, Bitcoin staking is poised to enhance security and interoperability across blockchain networks.

Tse explained that Babylon has integrated with platforms like Cosmos ATOM/USD, Optimism OP/USD, and Arbitrum ARB/USD, but scaling to other blockchains requires substantial infrastructure development.

He sees Bitcoin's stable, unchanging core as a foundation for building trustless use cases, such as collateralized lending protocols, which could reshape its role in decentralized finance (DeFi).

However, he acknowledged challenges, including the lack of a smart contract layer on Bitcoin, which his team addresses through cryptographic innovations like BitVM to enable cross-chain functionality.

"We are building a light-client technology that can connect to any blockchain in a trustless manner, and we are also building a modular architecture for our protocols, which allows us to rapidly deploy new use cases," Tse added.

Tse also touched upon risks and regulatory factors shaping the industry.

He identified slashing—penalties for validator misbehavior—as the primary risk for Bitcoin stakers, although he believes it can be mitigated with robust infrastructure and insurance solutions.

On regulation, Tse highlighted its crucial role, especially for institutional participation.

"Regulatory clarity, particularly on staking, is super important, I think, for the advance of the industry. I hope that with the new administration in the U.S., we can get to a stage where there are clearer rules," he said.

As Bitcoin's halving events raise questions about its long-term security budget, Tse argued that increased transaction activity from staking and other use cases could bolster miner fees, aided by advancements in mining technology.

With Babylon Labs spearheading this initiative, Tse's vision sees Bitcoin staking as a transformative force, potentially converting a $5 billion foothold into a $10 billion industry within the next ten months.