Core’s DeFi Landscape: Navigating the Currents of Q2 2025

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S Haynes
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Core’s DeFi Landscape: Navigating the Currents of Q2 2025

Dual Staking Fuels Growth Amidst TVL Dip, Developer Incentives Take Center Stage

The second quarter of 2025 presented a complex picture for the Core blockchain. While the network witnessed a significant uptick in user activity and a surge in dual staking adoption, its native Decentralized Finance (DeFi) Total Value Locked (TVL) experienced a notable contraction. This dichotomy highlights a period of strategic development and evolving user behavior, setting the stage for future growth and innovation.

In Q2 2025, Core’s native DeFi TVL saw a 36% decline, settling at 706.7 million CORE. When measured in US dollars, this represented a 31% drop to $367.5 million. This decrease occurred despite a positive trend in the price of CORE’s native token, which rose 7% to $0.52. Concurrently, the market capitalization of CORE increased by 4% quarter-over-quarter (QoQ) to $514.0 million, largely attributed to a modest 0.3% rise in its circulating supply. These figures suggest that while the underlying asset saw appreciation, its deployment within the native DeFi ecosystem experienced a pullback.

However, the narrative of Core’s Q2 performance is far from solely defined by its TVL. The network demonstrated robust growth in user engagement and transaction volume. Daily transactions saw an 8% QoQ increase, reaching 434,800, and active addresses climbed 10% to 206,200. This surge in network activity was further amplified by a remarkable 132% QoQ rise in average daily Decentralized Exchange (DEX) volume, which hit $2.1 million. These metrics point towards a broadening user base and increased utilization of Core’s on-chain infrastructure.

A pivotal driver of this enhanced activity appears to be the burgeoning adoption of Core’s unique dual staking model. The total value of both BTC and CORE staked experienced a substantial 30% increase, reaching $706.0 million. Within this, BTC staked saw a slight decrease of 4% to 5,300, while CORE staked surged by an impressive 41% to 246.3 million. The intertwining of these staking mechanisms is becoming increasingly apparent, with 56% of BTC stakers also engaging in CORE staking, signaling a growing confidence in the combined utility of the network’s native and Bitcoin-backed assets.

The quarter also marked a significant technical milestone with the activation of the Theseus Hardfork in late June. This upgrade introduced critical features such as fee sharing and contract hooks, aimed at bolstering developer incentives and providing greater execution flexibility within the ecosystem. Furthermore, the continuation of the “Sparks Season 3” initiative saw protocols like BitFLUX exhibiting positive results, underscoring the effectiveness of incentive programs in driving adoption and engagement for DeFi applications on Core.

Despite the overall DeFi TVL contraction, the network’s DeFi ecosystem showed resilience, with usage remaining concentrated in established protocols such as Colend, Sumer, and b14g. These platforms continue to attract a significant portion of the network’s DeFi activity, indicating a maturing and consolidating DeFi landscape.

Looking ahead, Core is poised for further expansion and innovation. Upcoming initiatives include the launch of lstBTC, integration with a major stablecoin, enhanced hardware wallet support, and the introduction of new staking mechanics, validator revenue sharing, and local fee markets. These developments are strategically designed to strengthen Core’s infrastructure, expand its token utility, and foster a more robust and attractive ecosystem for users and developers alike.

This article delves deeper into the intricacies of Core’s Q2 2025 performance, exploring the factors behind the TVL dip, the drivers of increased network activity, the impact of the Theseus Hardfork, and the strategic vision for the future.

Context & Background

To fully appreciate the developments of Q2 2025 for Core, it’s essential to understand the blockchain’s foundational principles and its unique approach to DeFi. Core emerged with the ambitious goal of bridging the security of Bitcoin with the scalability and smart contract capabilities of Ethereum. This hybrid architecture, often referred to as a “hybrid PoS/PoW” or a “Bitcoin-powered blockchain,” aims to leverage Bitcoin’s immense security while enabling a more dynamic and developer-friendly environment for decentralized applications.

The core innovation lies in its “Delegated Proof-of-Stake” (DPoS) consensus mechanism, which is secured by Bitcoin miners. Miners can opt-in to contribute their hash power to secure Core’s network, receiving CORE tokens as rewards. This symbiotic relationship creates a novel incentive structure that aligns the interests of Bitcoin miners with the growth of the Core ecosystem. This “Bitcoin-powered” aspect is not merely a marketing tagline; it represents a fundamental integration that distinguishes Core from many other Layer-1 blockchains.

The dual staking mechanism is a direct outgrowth of this hybrid model. Users can stake both their BTC (through wrapped or bridged solutions) and CORE tokens. Staking BTC allows holders to participate in securing the network and earn rewards, effectively extending the utility of their Bitcoin holdings. Simultaneously, staking CORE, the native utility and governance token, incentivizes network security and decentralization of the validator set.

Prior to Q2 2025, the Core ecosystem had been steadily building its DeFi infrastructure. This included the launch of various lending protocols, decentralized exchanges, and yield farming opportunities. The initial growth in TVL was driven by early adoption of these protocols, coupled with the inherent appeal of the dual staking model, which offered an attractive yield for both BTC and CORE holders. The expectation was that this model would foster a continuous influx of capital and user activity, driving further innovation and adoption.

However, the broader cryptocurrency market in early to mid-2025 was characterized by a degree of volatility and shifting investor sentiment. While some sectors experienced growth, others faced headwinds. This macro-economic context, coupled with specific developments within the Core ecosystem, would inevitably shape the performance metrics observed in Q2.

The introduction of the Theseus Hardfork in late June was a significant event, representing a commitment to continuous improvement and adaptation. Hardforks are crucial for blockchain networks as they allow for the implementation of new features, protocol upgrades, and bug fixes. The specific enhancements brought by Theseus – fee sharing and contract hooks – were designed to address key aspects of developer experience and economic incentives, signaling a forward-looking approach to ecosystem development.

The “Sparks Season 3” incentive program, mentioned in the Q2 summary, further contextualizes the efforts to boost DeFi activity. Incentive programs are a common strategy in the blockchain space to encourage user participation in new protocols and drive liquidity. The success of such programs often depends on their design, the appeal of the participating protocols, and the overall market conditions.

In essence, Q2 2025 for Core was a period of both consolidation and forward momentum. The network was working to solidify its unique value proposition through technological upgrades and incentive programs, while simultaneously navigating the inherent fluctuations of the crypto market and the evolving DeFi landscape. Understanding this backdrop is crucial for interpreting the specific data points presented in the quarter’s report.

In-Depth Analysis

The Q2 2025 report for Core paints a nuanced picture, revealing a dichotomy between declining DeFi TVL and robust growth in network activity and dual staking adoption. Let’s dissect these trends to understand the underlying dynamics.

DeFi TVL Contraction: A Closer Look

The 36% decline in native DeFi TVL (706.7 million CORE) and the 31% USD drop to $367.5 million are significant figures. Several factors could contribute to this contraction:

  • Market Sentiment & Capital Rotation: The broader crypto market may have experienced a period of consolidation or a shift in capital allocation. Investors might have moved funds from DeFi protocols into other asset classes or locked them in different forms of staking or yield generation.
  • Profit-Taking: Following periods of growth, users might have withdrawn capital from DeFi protocols to realize profits, especially if they perceived higher risk or sought opportunities elsewhere.
  • Protocol-Specific Challenges: While not explicitly stated, some individual DeFi protocols within the Core ecosystem might have faced internal challenges, reduced yields, or increased competition, leading to a drawdown of liquidity.
  • Focus on Infrastructure vs. Application Layer: The quarter saw significant investment and focus on core infrastructure upgrades (Theseus Hardfork) and the dual staking mechanism. This strategic prioritization might have temporarily diverted capital or attention away from direct DeFi protocol deployments.
  • The Impact of BTC Staking: While BTC staking is a positive for the ecosystem, the mechanics of how BTC is integrated and used within DeFi protocols can influence TVL. If a significant portion of staked BTC is held in less active forms or not directly contributing to DeFi yields, it could explain a lower TVL relative to the overall staked value.

It’s important to note that a decline in TVL doesn’t necessarily signify a failure of the DeFi ecosystem. It can also represent a maturation phase, where capital is deployed more strategically, or a temporary reallocation driven by market cycles.

Network Activity Surge: The Drivers

The contrasting trend of increased network activity, with daily transactions up 8% to 434,800 and active addresses up 10% to 206,200, is a strong indicator of growing user engagement. This growth is likely fueled by:

  • Dual Staking Adoption: The significant increase in CORE staked (41%) and the high rate of BTC stakers also staking CORE (56%) suggests that the dual staking mechanism is resonating with users. This provides an attractive incentive for users to interact with the network, beyond just DeFi protocols.
  • Incentive Programs: The continuation of “Sparks Season 3” and the success of DEXs like BitFLUX demonstrate the effectiveness of targeted incentive programs in driving user acquisition and transaction volume.
  • Technical Upgrades: The Theseus Hardfork, with its fee-sharing mechanisms and contract hooks, likely improved the developer experience and execution capabilities, making it more attractive to build and deploy applications on Core, thereby drawing more users.
  • Increased DEX Volume: The staggering 132% QoQ increase in average daily DEX volume to $2.1 million is a direct contributor to network activity. This suggests increased trading activity and liquidity provision on decentralized exchanges built on Core.

The rise in active addresses and transactions indicates that more users are actively participating on the Core network, even if their capital isn’t predominantly locked in traditional DeFi protocols. This suggests a healthy growth in the user base and increasing utility of the blockchain for various on-chain actions.

Dual Staking: The Pillar of Growth

The dual staking model is clearly a cornerstone of Core’s Q2 success in user engagement. The fact that 56% of BTC stakers are also staking CORE highlights a strong synergy. This implies that users are finding value in holding and staking both assets, likely attracted by the combined rewards and the opportunity to participate in securing and benefiting from the Core ecosystem.

The allocation of 88% of dual-staked CORE to the “top Satoshi tier” is particularly insightful. This suggests a concentration of high-value BTC stakers who are also actively participating in CORE staking, potentially indicating a strategic move by larger holders to maximize their exposure and influence within the ecosystem. This could also mean that the rewards structure or the perceived benefit of staking CORE at higher tiers is particularly attractive to those with substantial BTC holdings.

The 41% increase in CORE staked is a testament to the growing confidence in the network’s native token and its utility within the staking framework. This provides a solid base of staked CORE, which is crucial for network security and decentralization.

The Significance of the Theseus Hardfork

The activation of the Theseus Hardfork is a forward-looking development with long-term implications. Fee sharing is a crucial incentive for validators and developers, as it directly rewards participation and contribution to the network’s security and functionality. Contract hooks, on the other hand, offer greater flexibility for developers in creating more sophisticated and efficient smart contracts. These enhancements are designed to:

  • Improve Developer Experience: By providing better tools and incentives, Core aims to attract and retain talented developers, leading to a richer and more diverse dApp ecosystem.
  • Enhance Validator Economics: Fee sharing can make running a validator node more economically viable, encouraging more participation and thus decentralizing the network further.
  • Increase Execution Flexibility: Contract hooks can enable more complex logic and integrations, opening up new possibilities for DeFi and other applications.

The early signs of success from incentive programs like Sparks Season 3, observed in protocols like BitFLUX, suggest that these initiatives are effective in driving adoption and creating positive feedback loops. This indicates a well-thought-out strategy for bootstrapping new applications and encouraging user interaction.

Concentration in DeFi Usage

The observation that DeFi usage remains concentrated in protocols like Colend, Sumer, and b14g points to a developing maturity in Core’s DeFi landscape. While a wider array of protocols is desirable for a robust ecosystem, a few established players dominating usage is common in earlier stages. These protocols likely offer competitive yields, reliable services, and have built strong communities of users.

The challenge for Core will be to foster the growth of new and innovative DeFi applications, diversifying the user experience and attracting more capital to a broader range of protocols. This will likely be a focus for future development, building on the foundational improvements introduced in Q2.

In summary, Q2 2025 was a quarter of strategic development for Core. While the native DeFi TVL saw a downturn, this was offset by significant increases in network activity, user engagement, and the adoption of its unique dual staking model. The Theseus Hardfork laid the groundwork for future enhancements, and incentive programs showed early promise. The focus on infrastructure and user acquisition, even at the expense of short-term DeFi TVL, suggests a long-term vision for sustainable growth.

Pros and Cons

Analyzing the Q2 2025 performance of Core reveals a set of distinct advantages and disadvantages:

Pros:

  • Robust Network Activity Growth: The 8% QoQ increase in daily transactions and 10% rise in active addresses indicate a growing and engaged user base.
  • Strong Dual Staking Adoption: The high adoption rate (56% of BTC stakers also staking CORE) and significant increase in CORE staked (41%) highlight the success and appeal of Core’s unique value proposition.
  • Significant DEX Volume Increase: The 132% QoQ jump in average daily DEX volume signals increased trading activity and liquidity on Core’s decentralized exchanges.
  • Successful Incentive Programs: Initiatives like “Sparks Season 3” showing positive results in protocols like BitFLUX demonstrate an effective strategy for driving adoption.
  • Key Infrastructure Upgrades: The activation of the Theseus Hardfork introduces critical features like fee sharing and contract hooks, improving developer incentives and flexibility.
  • Growing Market Capitalization: A 4% QoQ rise in market cap suggests positive investor sentiment and growing overall value of the Core ecosystem.
  • BTC Security Integration: The fundamental model of leveraging Bitcoin’s security for its PoS chain remains a unique and powerful selling point.

Cons:

  • Significant Decline in Native DeFi TVL: The 36% drop in CORE-denominated TVL and 31% in USD terms indicates a potential challenge in retaining and attracting capital to DeFi protocols on Core.
  • Concentration of DeFi Usage: Reliance on a few established protocols for the majority of DeFi activity might limit the diversity and innovation within the ecosystem.
  • Potential Over-reliance on Incentives: While effective, long-term growth might depend on protocols sustaining activity organically without continuous incentive programs.
  • Market Sensitivity: The performance of Core’s DeFi TVL, like many other blockchains, is susceptible to broader crypto market fluctuations and investor sentiment.

Key Takeaways

  • Network activity is booming: Daily transactions and active addresses saw substantial QoQ increases, demonstrating a growing and engaged user base.
  • Dual staking is a key growth driver: The synergy between BTC and CORE staking is attracting users, with a majority of BTC stakers also participating in CORE staking.
  • DeFi TVL faced a contraction: Despite positive token price movement and increased network activity, the total value locked in native DeFi protocols declined significantly.
  • The Theseus Hardfork is a strategic upgrade: The introduction of fee sharing and contract hooks aims to improve developer incentives and execution flexibility, laying the groundwork for future innovation.
  • DEX activity surged: Average daily DEX volume more than doubled QoQ, indicating increased trading and liquidity provision on Core’s decentralized exchanges.
  • Incentive programs are effective: “Sparks Season 3” continues to yield positive results for protocols like BitFLUX, showing the value of targeted user engagement strategies.
  • DeFi usage remains concentrated: Established protocols like Colend, Sumer, and b14g continue to dominate the DeFi landscape on Core.
  • Future developments are promising: Upcoming launches like lstBTC, stablecoin integration, and new staking mechanics signal a commitment to strengthening the ecosystem’s infrastructure and token utility.

Future Outlook

The strategic initiatives planned for Core’s future suggest a strong focus on solidifying its unique position and expanding its utility. The planned launch of lstBTC is a significant development, likely aimed at further enhancing the utility of Bitcoin on the Core network and potentially attracting even more BTC capital into the ecosystem. By offering a liquid staked Bitcoin derivative, Core can tap into a massive market and provide users with a yield-bearing Bitcoin asset that can be seamlessly integrated into DeFi applications.

The integration of a major stablecoin is another crucial step. Stablecoins are the lifeblood of DeFi, facilitating trading, lending, and borrowing with reduced volatility. Having a widely recognized and liquid stablecoin integrated into the Core ecosystem will undoubtedly boost DeFi activity, attract new users, and provide greater stability for existing participants.

Expanding hardware wallet support is vital for enhancing security and accessibility for a broader range of users. As the ecosystem grows, robust security measures become paramount, and supporting popular hardware wallets will instill greater confidence and make it easier for users to manage their assets securely.

The introduction of new staking mechanics, validator revenue sharing, and local fee markets are all designed to further decentralize the network, improve validator economics, and create a more efficient and user-friendly experience. Validator revenue sharing can directly incentivize more participants to run validator nodes, strengthening the network’s security and resilience. Local fee markets could lead to more predictable transaction fees for users interacting with specific smart contracts or applications, reducing congestion and improving the overall user experience.

These planned developments signal a clear strategy to not only recover the DeFi TVL but to foster a more robust, secure, and diverse ecosystem. The focus is on building out the foundational infrastructure and utility that will attract and retain users and developers in the long term. The success of these initiatives will depend on their effective implementation, market adoption, and Core’s ability to continue innovating in response to the evolving blockchain landscape.

The lessons learned from Q2, particularly the strong performance of network activity and dual staking, will likely inform future strategies. The challenge will be to translate this increased user engagement into sustained growth in DeFi TVL by offering compelling yields, innovative applications, and a seamless user experience that leverages the unique strengths of the Core blockchain.

Call to Action

As Core continues to evolve, its unique hybrid architecture and forward-thinking initiatives present compelling opportunities for participants across the crypto space. For those looking to engage with a blockchain that bridges the security of Bitcoin with the innovation of smart contracts, now is the time to explore Core.

For Users:

  • Explore Dual Staking: If you hold BTC or CORE, investigate the benefits and mechanics of Core’s dual staking. Learn how you can secure the network and earn rewards by participating in this innovative model.
  • Engage with DeFi Protocols: Discover the DeFi protocols currently thriving on Core, such as Colend, Sumer, and b14g. Provide liquidity, participate in lending, and contribute to the growth of the ecosystem.
  • Stay Informed: Follow Core’s official channels and reputable crypto news outlets to stay updated on upcoming developments like lstBTC and stablecoin integrations.

For Developers:

  • Leverage New Features: With the activation of the Theseus Hardfork, explore the enhanced capabilities offered by fee sharing and contract hooks. Build innovative dApps that benefit from improved developer incentives and execution flexibility.
  • Participate in Incentive Programs: Keep an eye on “Sparks Season 3” and future incentive programs. These are excellent opportunities to bootstrap your projects and gain traction within the Core community.

For Investors:

  • Monitor Ecosystem Growth: Assess the ongoing development and adoption of Core’s infrastructure and DeFi applications. The planned future developments, such as lstBTC and stablecoin integrations, indicate a strategic roadmap for expansion.

Core’s journey in Q2 2025 showcases a blockchain actively building towards a more robust and interconnected future. By understanding its strengths, addressing its challenges, and actively participating, you can be a part of this unfolding narrative.

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