Echo Protocol Analysis: BTC Liquidity Aggregation and the Yield Layer of the Move Ecosystem

Echo Protocol: Reshaping BTC Productivity in DeFi

Echo Protocol is a cross-chain yield protocol focused on solving BTC liquidity fragmentation, aiming to unlock Bitcoin’s value within the DeFi ecosystem via a three-layer technical architecture. It addresses two major industry pain points:

1. The diverse forms of BTC assets (such as native BTC, liquid staking tokens (LSTs), and wrapped assets like wBTC), resulting in fragmented liquidity and inefficient utilization;

2. Long-standing challenge of BTC holders facing “non-yielding” assets.

Built on the high-performance Move chain Aptos, Echo features <1s latency and extremely low gas fees, supporting Ethereum, Solana, Movement, and other ecosystems. Within one month of launch, Echo injected $147M TVL into Aptos, with current TVL reaching $375M—accounting for nearly 40% of Aptos’ total TVL.

This Token Insights article explores how Echo Protocol’s three-layer architecture unlocks BTC’s DeFi potential, its response to a recent security incident, and cross-chain yield strategies.

Technical Architecture: Three-Layer Engine Unlocking BTC Value

Permissionless Liquidity and Aggregation Layer

Unified Asset Standard: Echo Protocol acts as a “cross-chain converter,” standardizing various BTC assets (such as B² Network’s uBTC, OKX’s xBTC, and BitGo’s wBTC) into a unified “Echo BTC asset.” This is implemented via smart contract vaults and integrates PoR (Proof-of-Reserve) services from Chainlink and Redstone, ensuring 1:1 peg monitoring and eliminating depegging risk.
For example, users can deposit uBTC and instantly exchange it for APT within the Aptos ecosystem or participate in lending. Staked APT converted into eAPT can also be used to secure other MoveVM chains.

Yield Layer: Diversified Strategies to Maximize Returns

This layer enhances BTC asset utility through three innovative mechanisms:

1. Echo Strategy: Dynamically allocates assets to optimal DeFi protocols (e.g., lending pools, yield farming), achieving automated leveraged returns up to 30% APY;

2. eMSTR: Pioneers non-liquidation leverage exposure through convertible notes, allowing users to hold BTC with at least 2.5x leverage without liquidation risks;

3. CeDeFi: Combines neutral strategies with Ceffu custodial services, balancing safety and yield.

These mechanisms transform BTC from a passive store of value into an active productivity tool.

LST Infrastructure Layer: Empowering Asset Composability

Liquid staking tokens (LSTs) such as aBTC are activated at this layer. Users can deposit aBTC into the Echo Vault to earn base yields or bridge it cross-chain to other ecosystems like Solana.
For example, via the Solana Vault, users can convert aBTC into solBTC and join Kamino’s high-yield liquidity pools, achieving “stake once, earn across chains.”

Security Incident and Trust Rebuilding

On June 14, 2025, Echo’s official X (Twitter) account was compromised, falsely claiming a “vault supply chain attack” involving a $266M uBTC theft and 20% collateral ratio drop. The FUD caused panic, and the token plummeted 35% within 24 hours.
The team clarified the next day that no actual breach occurred and user funds were safe, launching three countermeasures:

• Strengthening MFA and internal access controls;

• Partnering with security firms to trace the hack origin;

• Regularly publishing vault peg audit reports.

The incident showcased the protocol’s crisis response, but rebuilding trust hinges on TVL recovery—returning to $350M+ within 30 days would signal risk resolution.

Tokenomics: Dual Capture Anchored to Ecosystem Growth

Core Utility and Scarcity Design

The $ECHO token serves three main functions:

• Paying service fees for strategy execution;

• Participating in governance voting (e.g., adjusting LST parameters);

• Staking for boosted yields and airdrops.

Its value-capture mechanisms are tied to protocol growth:

• A portion of protocol revenue is used to buy back and burn $ECHO;

• TVL growth increases service demand, enhancing token scarcity.
  Full allocation details are not yet disclosed, but community incentives are expected to exceed 40%.

Balancing Deflationary Leverage

Non-liquidation leverage products like eMSTR must maintain >2.5x capital utilization to sustain protocol yield. If utilization drops below the threshold, a dynamic fee adjustment mechanism may be triggered to balance risk by raising borrowing costs.
For on-chain economic design examples, see JuCoin Research Library.

Development Update: Exchange Listings and Ecosystem Expansion

Dense Exchange Deployment

July 2025 is a critical launch window:

• July 2: Listed on KuCoin and Gate.io (opening price $0.099);

• July 4: Listed on XT Exchange;

• Binance Alpha launched an airdrop: users with ≥170 points could redeem 625 ECHO (costing 15 points).
  As of July 9, token price was $0.03964, down 60% from peak, with the market awaiting a liquidity recovery signal.

Cross-Chain Ecosystem Progress

• Deep Aptos Integration: Partnered with OKX’s xBTC to migrate $70M+ BTC to Aptos, with $30M deposited into Echo;

• Solana Collaboration: Bridged BTC to Kamino via Solana Vault to optimize yield strategies;

• Babylon Compatibility: Supports integration of native BTC Layer2 LSTs.

Challenges and Prospects: The Key to BTCFi Breakthrough

Risk Warnings and Responses

• Cross-Chain Dependency: If Aptos ecosystem stalls (e.g., Q2 2025 DEX volume decline), TVL may shrink;

• Competitive Pressure: Protocols like Babylon are already capturing the distributed BTC staking market;

• Regulatory Fit: Non-liquidation leverage design may face derivative compliance scrutiny.

Growth Catalysts

• Binance Mainnet Listing Expectation: Community anticipates a Q3 Binance listing, potentially bringing institutional liquidity;

• BTCFi Market Boom: Distributed BTC staking demand may exceed $10B in 2025;

• Multichain Iteration: EVM compatibility upgrades may unlock ecosystems like Arbitrum.

Industry Paradigm Shift

Echo Protocol is redefining BTC from “store of value” to “productive asset”:
Through a three-layer architecture, it unlocks cross-chain composability, enabling BTC to capture yield across chains without sacrificing ownership.
If it reaches $500M TVL and integrates 10+ BTC Layer2s by Q4 2025, Echo will solidify its position as the BTCFi hub in the Move ecosystem.