Alternatives: Existing BTC Lending Solutions

Before Side Lending, Bitcoin holders seeking liquidity had limited options, each with significant trade-offs in custody, trust, and composability. These alternatives fall broadly into two categories: centralized lending platforms and DeFi protocols requiring wrapped BTC

Centralized Lending Platforms

Popular services like BlockFi, Celsius (now bankrupt), Nexo, and Ledn allowed users to deposit BTC and borrow stablecoins or fiat. These platforms offered convenience and a simple user experience, but at the cost of custodial risk and lack of transparency. Users had to trust the platform’s internal risk management and custody practices, which in several high-profile cases led to loss of funds or platform collapse. Additionally, these platforms lacked on-chain verifiability, meaning users had no insight into how their assets were managed or whether they were overleveraged or rehypothecated.

DeFi Lending Protocols with Wrapped BTC

Protocols like Aave, Compound, and Morpho support BTC lending via wrapped Bitcoin tokens (e.g., wBTC, cbBTC, tBTC) on Ethereum and other EVM-compatible chains. These solutions bring programmability and transparency but introduce a new layer of custodial or bridging trust: the wrapping process relies on a custodian or federation holding native BTC off-chain and issuing a tokenized version on-chain. If the custodian fails or is compromised, users may lose access to their BTC.

From a user experience perspective, native BTC holders must first convert their BTC into a wrapped version before interacting with these DeFi platforms, adding friction and trust overhead to the lending process.