The product era of Bitcoin is here

Bitcoin's journey from fringe curiosity to mainstream store of value is undeniable.

Fifteen years after launch, the leading cryptocurrency stands as the sixth most valuable asset on planet Earth—with a $2.4 trillion market cap, it outvalues the global silver market.D Today, more than 56 million wallets hold Bitcoin. For many, the last thing they want to do is sell.

But that doesn't mean they're not using it.

A new wave of builders is fulfilling Satoshi Nakamoto's original vision for Bitcoin, not just as a hedge, but as infrastructure for peer-to-peer financial services.

Three segments are now converging into a unified, bankable financial ecosystem, collectively moving billions in daily capital:

1. Transparent Bitcoin-backed lending
2. Lightning Network payments
3. AI-powered financial automation

In this article, we explore key trends defining Bitcoin's emerging product era, drawing from on-chain activity and insights from exclusive interviews with founders and investors building the next generation of Bitcoin-native financial infrastructure. However, we can't boil the ocean here. This article is not about mining, price predictions, proliferation of Bitcoin rewards credit cards, or corporate treasury strategies, to name a few. We'll save those discussions for another time.

How does Bitcoin-backed lending unlock working capital?

The price of Bitcoin has surged since the 2022 bear market and a new wave of Bitcoin-backed lending platforms is offering access to capital with institutional-grade risk management. A new wave of collateralized loan products lets investors and companies borrow against BTC while preserving exposure.

The need for transparent, native solutions became critical after the collapse of centralized platforms like BlockFi and Celsius. Billions in user funds were lost due to custodial mismanagement and overleverage. But recent innovations in lending infrastructure have been designed to address those challenges.

Coinbase re-entered the lending market in early 2025 with an offering that allows users to borrow against their BTC, with real-time attestation of collateral reserves, facilitated by Morpho, a DeFi protocol. Strike also launched its own lending product in May 2025, enabling loans from $10,000 to $1B at rates as low as 9% APR.

The incentives to borrow instead of sell are strong. Borrowers can avoid triggering taxes on capital gains while retaining long-term exposure to Bitcoin, an asset that performs more like stocks than currency. The year-over-year value of Bitcoin has moved higher in 78 of the last 100 months, a rate nearly identical to the Nasdaq.D Many borrow to compound wealth while preserving their core asset.

"People don't want to sell their Bitcoin," said Robin Obermaier, founder of Liquidium, a decentralized lending platform. "There's a huge demand for liquidity, but the old model of wrapping Bitcoin and sending it to another chain is flawed. It introduces counterparty risk, technical complexity, and regulatory uncertainty."

The number of Bitcoin users sitting on profitable portfolios has skyrocketed in recent years. There are now 55 million Bitcoin wallets in the money, up from 21 million at the start of 2023, according to data from IntoTheBlock.com. Most are holding for the long-term, or forever. The average Bitcoin is held for 4.4 years, and 30% have been stored for five years or more. The price has jumped by at least 13x in that span. For these hodlers, there is a growing desire to generate yield and liquidity without selling.

Unlocking liquidity without letting go of Bitcoin

In response, Bitcoin-backed lending has surged. Among CeFi (centralized finance) providers, Coinbase offers collateralized loans up to $1M, processing some $1B through mid-July, according to a company announcement. In addition to Coinbase and Strike, others such as Ledn, Nexo and Unchained Capital are offering similar products. Bitcoin-backed loans are also entering the mainstream of financial services. The world's largest bank JPMorgan is considering Bitcoin-backed loans to clients, according to the Financial Times. In Australia, a company has launched the world's first Bitcoin-backed mortgage. Block Earner plans to offer home loans, with Bitcoin backing 50% of the purchase price as custodied collateral.

These products don't come without risk. Loan providers guard against volatility by requiring a deposit, typically 50-60% of the value of the loan. Some lenders begin partial liquidations at higher LTV ratios. Coinbase, for example, allows LTV ratios up to 86% before liquidation is triggered.

Among on-chain lenders, more than $6.98B worth of Bitcoin has been deposited in DeFi (decentralized finance) protocols, according to DeFiLama. We can think of this sum as the total amount of Bitcoin being put to work for yield (or governance) in blockchain projects or leveraged for liquidity. But this sum doesn't capture every token. Aave, an Ethereum protocol, is the largest DeFi lender. Bitcoin-backed loans on the platform amount to $7.55B but carry the downside that they must be staked 1:1 by wrapping Bitcoin—a factor that cuts the leverage opportunities in half compared to most CeFi products.

Companies rethink treasury management with Bitcoin

Borrowing isn't limited to retail investors. Companies are increasingly incorporating Bitcoin into their treasury strategies, from early-stage startups to public companies.

"We put a decent chunk of our treasury into Bitcoin," said Graham Krizek, founder of Voltage, a Lightning infrastructure provider. "It's extended our runway and saved us from taking out traditional loans. That's real operational leverage."

Voltage also uses Lightning Network liquidity to reduce costs and access capital internally. "If we didn't have Lightning liquidity to work with, we'd have to go raise. It's the grease that keeps the machine running," Krizek added.

Public companies like Block have gone further, generating Bitcoin-denominated yield (in the form of fees) by operating Lightning nodes. Last year, Block generated about 9% of total yield from their Bitcoin holdings, the company announced at the Bitcoin 2025 conference. These models suggest a future where Bitcoin is not just stored as a hedge, but actively contributes to cash flow and capital access.

Risk management in Bitcoin lending

As institutional interest in these products grows, the infrastructure around them is maturing. Platforms such as Strike, Ledn, Nexo and Unchained are offering more transparent loan structures, with clearer risk disclosures and tighter integrations into the Bitcoin ecosystem. The regulatory climate is improving as well, with stablecoin legislation and crypto asset definitions advancing in Congress. Compared to asset-backed loans Bitcoin is a pristine form of collateral from the lender's perspective because of its ability to instantly liquidated 24/7, compared to a house, which takes months or even years to liquidate.

The biggest challenge remains Bitcoin's volatility. But platforms are building risk models and loan-to-value protections to absorb swings in price. The shift from speculative lending to collateralized credit reflects a broader maturation in Bitcoin's role within the financial system.

"Borrowing is definitely the riskier move," noted Alex Leishman, CEO of River Financial. "But for those who are long Bitcoin and want to unlock liquidity without selling, it's becoming a viable option—especially as the infrastructure gets more sophisticated."

How does the Lightning Network make BTC (and Stablecoins) spendable?

As borrowing against Bitcoin becomes more accessible and efficient, it's also fueling downstream activity, especially on the Lightning Network. While Bitcoin's base layer is relatively slow and expensive by design, the Lightning Network has emerged as the infrastructure layer that makes Bitcoin usable for real-world payments.

Lightning works by allowing users to open payment channels and transact off-chain, settling only occasionally on Bitcoin's base layer. This dramatically reduces fees and increases transaction speed—from minutes to milliseconds. Transactions for ordinary purchases like a cup of coffee on the Lightning Network could take under a second and settle instantly, unlike the base layer, which takes about 10 minutes to settle, or a credit card network which takes up to two days to finalize.

Stablecoins transform Lightning Network usage

Though initially designed for Bitcoin payments, Lightning is now evolving to support a wider range of assets. Stablecoins (especially USDT) are increasingly being integrated into Lightning channels, creating new use cases beyond Bitcoin itself. 

At the Bitcoin 2025 conference in May, Tether CEO Paolo Ardoino said that the Lightning Network was the "perfect solution" for scaling transactions because of its peer-to-peer architecture. 

"The logic is there, the opportunity is there," Ardoino told the audience. "If you want to scale, you cannot use a single-share state. You have to use peer-to-peer channels."

That evolution is crucial. While few consumers want to spend their Bitcoin, stablecoins offer familiar, spendable units on the same rails. Obermaier noted that even in El Salvador, where Bitcoin is legal tender, stablecoin usage dominates among the everyday population. The Liquidium CEO spent three months in the South American country last year.

"In El Salvador, I saw it firsthand," Obermaier said. "People were using Blink or Chivo wallets, but they weren't sending Bitcoin. They were sending stablecoins over Lightning. It's just easier to think in dollars."

Enterprise Lightning Network integration

Lightning is also quietly powering a wave of B2B financial infrastructure. Companies like Voltage provide Lightning-as-a-Service for wallets, exchanges and fintechs. River Financial's API suite enables Lightning integration for institutional clients. More banks and fintechs are plugging into the network.

Lightning Network capacity is at about $450M as of mid-July, a 50% increase year-over-year. Adoption of the Lightning Network for payments has seen steady growth in recent years with companies like Coinbase, Kraken and Strike integrating its capabilities into their core business models. Decentralized projects such as Nostr have also utilized the network for millions of users. A Voltage analysis showed a 200% increase in payment volumes from 2023 to 2024. This year, Revolut Bank enabled Lightning payments for its EU customers. 

These use cases are encouraging more startup activity. VC investors are increasingly interested in companies building on the lightning network. Yet, these investments face a tough opportunity cost as they must compete against the expected 5- to 10-year outcome of Bitcoin itself, which is virtually unmatched by other assets, including venture as a whole, in the last decade. VC deals mentioning "Bitcoin" or "lightning" and excluding "mining" jumped 32% in 2024 to 194 deals, an all-time high.

Still, Lightning has its drawbacks. Collateral must be locked into payment channels. Channel liquidity must be carefully managed. Routing large payments across the network can be difficult. There's also a steep learning curve to build on the Lightning Network, which has been a barrier to adoption.

"It's hard work," said Voltage's Krizek. "Every blockchain is roughly the same— send, receive, confirm. But Lightning is fundamentally different. You're dealing with IOUs, channel openings, liquidity balancing. That complexity is also its strength. With Voltage, we abstract it away through APIs, but there's still a learning curve."

Others agree the challenge is worth solving. "From a first principles perspective, Lightning is the only truly decentralized payments layer," said Christopher Calicott, managing partner at Trammell Venture Partners (TVP), a Bitcoin-focused investment firm in Austin. "Every other chain relies on validators that aren't really tied to Bitcoin. Lightning is built directly on top of it."

Regulatory clarity fuels crypto adoption

Lack of regulatory clarity has been another major hurdle for institutional crypto adoption, but recent momentum in Congress is starting to change that. In July, two major pieces of legislation took forward leaps. The GENIUS Act—the Guiding and Establishing National Innovation for US Stablecoins Act— became law, establishing a federal regulatory framework for payment stablecoins. The CLARITY Act—the Digital Asset Market Clarity Act—was passed by the US House and aims to define cryptocurrency as a security or commodity and clarifies the SEC's jurisdiction. These Acts and others making their way through Congress are building confidence and setting a foundation that should unlock institutional participation and merchant adoption of cryptocurrencies. Founders and investors say they have seen a marked shift in sentiment brought by the Trump administration's favorable stance toward crypto.

"Post-election, we saw a massive uptick in adoption," said Leishman. "The administration shift flipped the switch—what was once a regulatory gray zone is becoming a clearly defined sandbox. That gave people confidence to build and integrate."

The future of Lightning and other Layer-2 solutions

Lightning's merchant moment may be near. With tools like Strike, Voltage and River offering plug-and-play infrastructure, the cost of accepting Bitcoin and stablecoin payments is falling fast—especially compared to legacy payment processors.

"It's like Visa—but better," said Krizek. "Zero fees, half-second settlement, and no chargebacks. That's a big deal for merchants."

For Lightning backers, the roadmap is clear: Bring Lightning to the background, make it invisible to users, and let developers and institutions build on top. Payments are just the start. With stablecoins and AI integrations, Lightning is becoming the financial fabric of the internet.

Of course, Lightning isn't the only non-base layer offering payment rails. Other sidechain networks such as Botanix and Citrea are also gaining traction, offering programmability and scalability on Bitcoin through rollup architectures. These platforms enable smart contract capabilities and EVM compatibility, expanding Bitcoin's utility beyond what Lightning alone can provide.

Something that is catching on faster than sidechains are eCash protocols. Fedimint and Cashu are two different eCash protocols built on top of Lightning. These custodial accounts have the added benefit of privacy and minimal fees. Cashu even enables off-line payments.

Together, these protocols provide a natural payment infrastructure for the next phase of the internet.

The rise of the Bitcoin bots: AI-powered financial agents on Lightning Rails

As Lightning vies to become the de facto transaction layer for Bitcoin (and increasingly for stablecoins) it's also laying the groundwork for a new kind of user: not a person, but an autonomous agent. The next frontier for Bitcoin is machine payments. Using Lightning's capability to support microtransactions and real-time settlements, AI agents can autonomously trigger payments, reconcile balances and manage spending across APIs without relying on traditional banking rails or waiting on multi-day settlement times.

"Seventy-five percent of the internet today is APIs talking to APIs," says Calicott. "Now imagine AI agents connected to 40 or 50 financial APIs, automating everything from bill payments to treasury management. The last mile of that system will be Lightning."

Because Lightning enables instant, near-zero-cost transactions with programmable control, it's well-suited for AI agents tasked with moving money across the internet. They'll use Bitcoin under the hood, often via stablecoins issued on Bitcoin rails.

"Lightning is the best way to handle the number of API calls needed to run AI at scale,” according to Calicott. “It's fast, low-cost and native to the internet's infrastructure."

Builders of the early internet planned for digital currencies. The earliest web architecture relied on standardized protocols like HTTP status codes—think 404 “Not Found” errors that you see when a webpage won't load. There is a lesser known but powerful extension called the L402, which signals "Payment Required." This protocol holds promise as a foundational layer for incorporating Lightning payments into AI workflows and machine-to-machine interactions.

As companies experiment with embedded finance and digital assistants, Lightning offers a native solution for real-time value exchange without the need for traditional banking infrastructure. Future AI agents may reconcile balances, approve payments and optimize spending—all via programmable Bitcoin and stablecoin rails.

And if Lightning becomes the "settlement layer of the internet," as its proponents believe, AI won't just talk to banks. It'll talk to Bitcoin. This convergence may well signal a future where Bitcoin isn't just digital gold, it is the native currency of the internet.

About the Crypto Team: 

At First Citizens Innovation Bank, we support the vision of venture-backed, blockchain-based companies with tailored financial solutions, expert guidance, and a team dedicated to growth at every stage. Our dedicated team of crypto-native industry experts can help you navigate obstacles to growth, offering everything from credit solutions to valuable industry insights.