Summary:
- Kraken has launched BTC Vault for Bitcoin holders to earn rewards in BTC.
- The reward comes from real borrowers who pay to use an individual’s BTC in the DeFi ecosystem and not from artificial marketing techniques.
- Users can set up the BTC Vault from the Kraken app without any technical complexity or an additional seed phrase.
Kraken’s new product, BTC Vault, is specifically designed for long-term Bitcoin holders. They can earn rewards in BTC without any management.
Kraken launched this product with Kraken Earn, enabling users to earn up to 2.5% in BTC-denominated rewards while holding Bitcoin. This resolves the long-term issue faced by HODLers.
Bitcoin Vault is powered by Veda, the DeFi infrastructure provider, and Sentora for the strategic intelligence and risk management layer. The individual user asset is allocated across established protocols like Aave and Morpho.
About Kraken:
Kraken is a US-based cryptocurrency exchange. It was founded in 2011 and was one of the first exchanges to offer spot trading with margin, regulated derivatives, and index services. Kraken is also the first cryptocurrency company to obtain a bank charter.
How does BTC Vault work?
BTC Vault works in three steps.
First of all, BTC holders can transfer some of their tokens to the BTC Vault from their Kraken balance.
The system will designate the funds to on-chain lending markets, and BTC borrowers will pay interest to access liquidity. BTC holders will receive the rewards automatically.
Why is the BTC Vault Different?
Kraken’s BTC Vault uses a real yield model instead of artificial marketing or promotions. Several artificial promotion rates became obsolete in the past, as most of them have no external commercial utility or underlying revenue to sustain their value. However, in the case of Kraken’s BTC Vault, the yield is generated by borrowing demand on the blockchain. The rates can fluctuate based on lending-side activities and are not driven by marketing gimmicks.
Another distinguishing feature of BTC Vault is that it removes any kind of technical barriers. While external wallets require account creation, providing a seed phrase, manually moving funds between lending, staking, or liquidity systems, and many other complex steps, the BTC Vault can be set up with a few simple steps. BTC holders can open the Kraken app, go to Earnings, select Bitcoin, enter the amount, and confirm. Rewards will be automatically collected and compounded.
Bitcoin Vault for Holders
Kraken’s Bitcoin Vault is designed to target long-term Bitcoin holders who do not intend to sell in the short term. It resolves the dilemma of making Bitcoin profitable without selling it. BTC Vault helps long-term holders earn rewards from their Bitcoin without changing price exposure. When the Bitcoin price increases, holders receive capital and rewards, which tend to follow an upward trend.
BTC Vault’s Security Aspects
In regard to the security of Bitcoin Vault, Kraken assures two things. One is that all allocations are recorded on-chain, providing verifiable logs. The second is that smart contacts used for fund deployments are submitted for audits.
Final Thoughts
As exchanges and DeFi platforms are trying to position themselves as yield products, Kraken’s Bitcoin Vault is seen as a major step to attract users who want to explore beyond spot trading. The exchange also aims to attract its existing customers as well as Bitcoin holders outside it, who are looking to consolidate their assets in a single platform and generate additional yields. BTC holders can use BTC Vault through Kraken and Krak apps.
In addition to Kraken, several centralized finance (CeFi), decentralized finance (DeFi), and institutional platforms have introduced Bitcoin vaults.
Kraken’s DeFi Earn offering has exceeded $240 million since its launch in January. It was generated through organic customer adoption rather than token-based incentives.