The decentralized finance (DeFi) sector is evolving with Bitcoin-centric solutions, particularly BTCFi, which aims to utilize Bitcoin as an active asset in DeFi rather than merely a store of value. Bitcoin’s strengths of security and liquidity make it a viable foundation for this innovation, despite its lack of native smart contract capabilities. Elastos is a prominent player in this space, using merged mining to leverage Bitcoin's security for its decentralized applications. About 50% of Bitcoin's hashing power secures Elastos, establishing it as a robust network for financial applications. The BeL2 Arbiter Network is a significant development that employs zero-knowledge proofs to facilitate trustless Bitcoin transactions on Elastos and Ethereum, removing the need for custodial intermediaries. This model has piqued institutional interest, with projects like a BTC-backed stablecoin in development. Challenges such as regulatory uncertainties and ecosystem awareness persist, but Elastos’ approach may position it for growth in the expanding BTCFi landscape, enhancing Bitcoin's integration in DeFi, particularly through innovations like decentralized identity and cross-chain interoperability.

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