The Bitcoin DeFi ecosystem is poised for a transformative leap as sBTC Cap-3 launches tomorrow, May 22, 2025. This upgrade adds 2,000 BTC capacity to the system, building on Cap-1 (1,000 BTC) and Cap-2 (2,000 BTC) to unlock a total of 5,000 BTC for Bitcoin-native decentralized finance. 

Combined with Velar’s groundbreaking perpetual decentralized exchange (PerpDEX) on Stacks, this liquidity injection is set to accelerate innovation, adoption, and institutional participation in Bitcoin’s DeFi frontier.

1. sBTC Cap-3: Fueling the Bitcoin DeFi Engine

The phased rollout of sBTC—a trustless Bitcoin-pegged asset—has been a cornerstone of Stacks’ strategy to activate Bitcoin’s $2 trillion latent capital. Cap-3’s deployment marks a critical milestone, expanding sBTC’s capacity to 5,000 BTC and enabling deeper liquidity pools for decentralized applications (dApps).

• Liquidity Multiplier Effect: With 5,000 BTC now accessible on Stacks, developers can build more sophisticated financial products, from lending protocols to yield-generating vaults. This aligns with Stacks’ roadmap to drive institutional adoption through improved custody solutions and programmable BTC vaults.

  
  

• Institutional Onboarding: Cap-3’s scalability supports qualified custodians like BitGo and Copper, allowing institutions to deploy BTC capital securely on-chain—a key unlock for mainstream DeFi participation.

2. Velar PerpDEX: The Vanguard of Bitcoin-Native Trading

At the heart of this liquidity surge is Velar, the world’s first Bitcoin-native perpetual DEX, live on Stacks since March 2025. Velar’s integration with sBTC and USDh (a Bitcoin-backed stablecoin) has positioned it as the ecosystem’s liquidity hub, offering:

• Leveraged Trading with Bitcoin Finality: Traders access up to 5x leverage (to be increased soon) on pairs like sBTC-USDh, settled with 100% Bitcoin finality and 5-second block times—a technical feat enabled by Stacks’ Nakamoto upgrade.

  
  

• Security & Decentralization: Unlike wrapped BTC models reliant on centralized custodians, Velar leverages sBTC’s trust-minimized design, ensuring users retain custody while trading.

  
  

• Yield Opportunities: USDh collateral earns a 5% base yield, incentivizing liquidity provision and stabilizing the platform during volatility.

With Cap-3’s added liquidity, Velar plans to expand its offerings, introducing new pairs (e.g., BTC-STX) and cross-chain capabilities, further bridging Bitcoin’s store-of-value utility with DeFi’s functional demands.

3. The Ripple Effect: What This Means for Bitcoin DeFi

The synergy between sBTC’s scalability and Velar’s infrastructure creates a flywheel effect:

1. TVL Growth: Bitcoin DeFi’s overall total value locked (TVL) is projected to surpass $24 billion in 2025, driven by sBTC’s liquidity and other prominent Bitcoin L2s such as Babylon, Mezo, Bitlayer, BOB, etc.

   
   

2. Innovation Catalyst: Programmable BTC vaults and dual-staking mechanisms (combining BTC and STX) could emerge, offering scalable yield strategies while aligning incentives across the ecosystem.

   
   

3. User Adoption: Fee abstraction—allowing users to pay gas in sBTC—reduces friction for Bitcoin-native audiences, a priority highlighted in Stacks’ roadmap.

4. Stacks: The Infrastructure Powering the Revolution

Stacks’ role as a Bitcoin L2 cannot be overstated. Its architecture ensures:

• Bitcoin Finality: Transactions inherit Bitcoin’s security, critical for high-stakes DeFi activities.

  
  

• Speed & Scalability: Five-second block times and ongoing upgrades (e.g., Wasm compiler in Q3 2025) enhance throughput, rivaling Ethereum’s Layer 2s.

  
  

• Regulatory Clarity: With pro-crypto SEC leadership and institutional custody support, Stacks is uniquely positioned to attract compliant capital.

5. The Road Ahead: Bitcoin as the Foundation of DeFi

The sBTC Cap-3 upgrade and Velar’s dominance signal a paradigm shift. Analysts predict Bitcoin L2s like Stacks will soon eclipse wrapped BTC derivatives, cementing Bitcoin’s role as both a reserve asset and a DeFi powerhouse. For Stacks, the next phase involves integrating trustless sBTC withdrawals (live since April 2025) and expanding cross-chain liquidity—a vision aligning with Stacks’ "Toward Trustless sBTC" initiative.

Conclusion

As sBTC Cap-3 goes live, Bitcoin DeFi stands at an inflection point. Velar’s PerpDEX, powered by Stacks’ robust infrastructure, is not just a trading platform—it’s a testament to Bitcoin’s evolving utility. With liquidity surging and innovation accelerating, the era of Bitcoin as a passive store of value is over. The future is programmable, decentralized, and unstoppable.

Trade on Velar PerpDEX: perpdex.velar.com

Learn about sBTC: Bitcoin L2 Labs