A secure Bitcoin yield solution allows institutional users to obtain value-added returns while maintaining asset control.
This guest commentary was written by Hong Sun, the institutional business lead of Core DAO.
Traditional financial institutions have begun to benefit from Bitcoin price increases—but their approach is far from optimal. Most institutions hoard Bitcoin like cash, satisfied with price exposure while ignoring its value appreciation potential. This state will not last, and Wall Street will eventually seek more efficient ways to utilize Bitcoin assets.
However, caution is crucial in the crypto realm. We have witnessed how chasing yields without understanding underlying risks can backfire. Fortunately, safe and sustainable Bitcoin yield products that minimize principal risk are no longer theoretical but practically available.
Lessons from 2022: Not All Yields Are Equal
Institutions holding Bitcoin should reflect on recent crypto industry history. The 2022 market crash exposed yield strategies built on fragile foundations—former giants like Voyager, BlockFi, Celsius, Three Arrows Capital, and FTX now lie buried in the crypto graveyard due to poor risk management and unsustainable yield promises.
What's the lesson? Not all yields are created equal. Many so-called yield products introduce new risk layers: counterparty risk, custody vulnerabilities, confiscation mechanisms, and smart contract flaws. These factors are fatal for institutions that misjudge risks.
The core issue is that Bitcoin, unlike Ethereum, does not provide native staking rewards through its proof-of-work model. Therefore, holders have traditionally been forced to generate yields through lending, re-pledging, or providing liquidity—all of which involve trust compromises.
Bitcoin holders face a dilemma: enjoying self-custody and absolute security on one side, while being tempted by yields on the other. But bridging this gap should not require people to stake their faith.
Timelocks: Bitcoin's Native HODL Function
Although Bitcoin does not support smart contracts like Ethereum, it possesses a powerful native function: timelocks. Initially designed to enable users to "HODL" through mathematical determinism—locking BTC immovable until a specified block height—this feature remained underutilized for a long time.
Now, the same HODL mechanism is opening new frontiers: creating yields without surrendering custody.
The innovation lies in a new staking model that directly uses Bitcoin (not wrapped versions) as the staking asset. Through Bitcoin's "Check Lock Time Verify" (CLTV) functionality, holders can lock BTC and participate in protecting the blockchain network to earn rewards while maintaining complete control. Their Bitcoin always remains in their own wallet, cannot be transferred, re-pledged, or lost—yet generates returns.
This is the security level financial institutions demand. No new trust assumptions, no slashing risks, no smart contract complexity. Pure utilization according to Bitcoin's design principles, simply adding an incentive layer.
Institutions Are Already Acting
Institutional adoption of this model is already underway. DeFi Technologies' subsidiary Valour Inc. recently launched the world's first yield-generating Bitcoin ETP using this mechanism—combining Bitcoin custody's immutability with secure staking performance advantages.
These solutions enable institutions to move beyond high-risk lending and speculative trading strategies. Bitcoin can now be not just a store of value, but an asset class that generates returns.
From Passive Holding to Active Participation
For institutions holding Bitcoin through custodians or ETFs, current Bitcoin is a negative-yield asset. Custody and management fees erode returns, contradicting Bitcoin's core argument as an inflation-resistant tool and value store.
Secure Bitcoin yields change this equation. Institutions can now generate returns while supporting the decentralized network—becoming an important bridge between traditional finance and blockchain native systems.
While this evolution is in its early stages, the direction is clear: Bitcoin's future is not idle, but active, integrated, and aligned with institutional needs.
Key Insights
The right Bitcoin yield solution no longer requires new trust assumptions or exposure to unverified products. It is rooted in Bitcoin's own security model, leveraging the timelock function originally designed as a HODL mechanism, creating returns while protecting principal.
As financial institutions gradually understand this development, swift actors will gain a competitive advantage. The question is no longer "Is institutional Bitcoin yield feasible?" but "How will you utilize it?"
