Analysis of the BTC Liquid Staking Track: How to Activate Trillions of Dollars in Assets?

Babylon, as a non-custodial Bitcoin staking solution, achieves BTC layer native asset staking through cryptography and provides POS security guarantees for other blockchains. The Bitcoin staked in Babylon remains on the mainnet, secured by the PoW mechanism, and the entire process operates entirely on cryptography without relying on third parties. This highly secure solution has gained widespread recognition in the BTC community.

Babylon has opened up new revenue streams for Bitcoin holders while also addressing issues such as inflation and startup difficulties for small and medium-sized POS chains. This innovation will fundamentally change the way the BTC ecosystem operates.

BTC Liquid Staking Overview

The BTC liquid staking program is similar to a savings account, allowing users to deposit and withdraw at any time while earning interest. Additionally, liquid staking tokens can also generate extra income in other DeFi projects. In contrast, staking on Babylon is more akin to a fixed deposit, offering higher returns but not allowing for withdrawals at any time.

This solution can also attract more non-mainnet BTC users to participate, such as users holding wBTC on Ethereum. Essentially, liquid staking can be seen as the project team borrowing users' BTC to stake in Babylon, using the earnings to pay users interest, while the bonds ( and the liquid staking tokens ) that users receive can also be traded.

Currently, most Babylon liquid staking tokens are built on Ethereum, and will support multi-chain in the future. Except for Lombard, other projects adopt a custodial model, where the project team stakes on behalf of users to Babylon, and third-party institutions provide liquidity support.

pSTAKE

pSTAKE adopts an institutional custody liquidity model. User funds are staked to the pSTAKE address, supported by liquidity from institutions such as Cobo, and the project party then stakes BTC to Babylon.

yBTC is the official liquid staking token of pSTAKE, which has not yet been issued. Users are expected to utilize yBTC to participate in other DeFi projects to earn rewards. yBTC will initially be issued on Ethereum and will later expand to other L2s.

The project is currently in the v1 stage and has not yet launched the points program. It is expected that points will be launched simultaneously when the mainnet goes live, and additional points can be earned by participating in testnet staking. Currently, v1 has 44,813 users participating, who have staked 40.65 testnet BTC.

Lorenzo

Lorenzo implemented a principal and interest separation business similar to Pendle in the BTC liquidity program.

Users send BTC to Lorenzo's multi-signature wallet, which is hosted by the staking agent (, a group of trusted Bitcoin institutions and traditional financial giants ), and receive stBTC as a staking certificate. Lorenzo then stakes the BTC with Babylon.

Lorenzo issues three types of tokens:

1. Liquidity principal token ( LPT ): represents redeemable BTC principal, stBTC is Lorenzo's official LPT.

2. Yield accumulating token ( YAT ): Represents the right to claim earnings from the staking project at the end of the re-staking period. YAT is transferable, but non-transferable after maturity.

3. Stake proof token (SPT): After users receive rewards using YAT, YAT is automatically converted to an equivalent amount of SPT, entering a unified queue and is not tradable. SPT is used to sequentially burn stBTC to withdraw BTC.

LPT and YAT can both be traded, and holders can claim rewards and withdraw the re-staked BTC respectively.

stBTC and LPT can be seen as another form of wrapped Bitcoin, with Lorenzo's goal being to eventually replace wBTC. The value of YAT comes from accrued yield and speculation on future yields, exhibiting high volatility.

The Lorenzo mainnet will be launched in two phases. Phase One mainly tests the conversion between BTC and stBTC. Phase Two introduces staking agents for decentralized management of users' staked BTC and issues YAT to represent staking rewards.

Lombard

Lombard adopts a more decentralized approach, where user funds are directly staked to Babylon, eliminating the need to trust third parties for liquidity. The overall architecture consists of users, Bitcoin nodes, backend, and the Consortium( decentralized state machine, managing the staking process ).

The staking process is managed by a decentralized Consortium. Users send BTC to the Consortium address, and after the backend detects the deposit, it triggers the notarization process. After verification by the Consortium, BTC is staked to Babylon, and an equivalent amount of LBTC is minted for the user.

LBTC is the liquid staking token of Lombard, which can earn native rewards through Babylon staking. LBTC is exchangeable 1:1 with BTC, supports cross-chain, and can be used as collateral for DeFi protocols. LBTC was initially issued on Ethereum and will later expand to multiple chains.

Lombard is currently in the first phase, operating in Private Beta mode on the Ethereum mainnet. Eligible participants can stake native BTC and mint LBTC, but withdrawals are not yet supported. The second phase will begin in a few weeks, opening LBTC to the public while maintaining a deposit limit.

Solv

Solv integrates the staking rewards and re-staking rewards from BTC Layer 2 ( into Babylon ), and tokenizes the DeFi yield from ETH Layer 2 into SolvBTC. SolvBTC can be seamlessly integrated with other protocols to deliver Bitcoin liquidity to various applications. Solv currently supports Ethereum, BNB, ARB, and Merlin.

Solv adopts a decentralized asset management architecture, including modules such as security guardians, price oracles, and tokens based on liquidity strategies, establishing a trustless process through smart contracts. Off-chain funds are held by reputable custodians.

solvBTC.BBN is Solv's liquid staking token, which will be integrated with various DeFi protocols. Its uses include:

1. Provide instant liquidity and high yield opportunities in DEX.
2. Earn extra income by staking in the lending protocol.
3. Trade future earnings in the yield trading protocol.

Since its launch in April, SolvBTC has attracted over 12,000 BTC in stake and 20,000 users participating. Users can earn points through deposits, invitations, and activities, with points consisting of basic points, accelerated points, and referral points.

Bedrock

Bedrock was originally developed for the Eigenlayer ecosystem and later became the largest staking entry on IOTX, achieving nearly $200 million TVL in the ETH and IOTX ecosystems. Recently, it was commissioned by Babylon to develop the BTC liquid staking protocol UniBTC, allowing Ethereum users' wBTC to be staked to Babylon. uniBTC is currently issued on Ethereum.

Users holding uniBTC can earn Bedrock rewards and Babylon points. Currently, uniBTC does not support unstaking, but it can be sold directly as it can be exchanged 1:1 with WBTC.

Master Protocol

Master Protocol is a yield aggregation platform that aggregates BTC ecosystem projects such as Bouncebit, Babylon, and BitLayer, allowing users to stake or trade through the platform. The main products include:

1. Master Yield Market: Provides yield trading opportunities, aggregates Bitcoin ecological assets, packages them as MSY, and then splits them into MPT( principal) and MYT( interest) for users to trade.

2. LST Protocol on Botanix Spiderchain: liquid staking protocol, enhancing BTC liquidity and yield. Not yet launched, will collaborate with Botanix in the future.

Master Protocol has launched the Master Yield Pass incentive program, with a total of 10,000 NFTs, all of which have been minted for free. After staking, users can earn points, platform fee dividends, and other benefits.

Chakra

Chakra is a ZK-driven shared modular Bitcoin settlement layer that provides unified settlement services for Layer 2 networks, constructing an aggregated Liquidity and interoperability network. The funds in the Bitcoin network for Chakra are managed by Cobo's MPC solution and staked to Babylon for returns.

tlBTC is the staking certificate of Chakra, corresponding to the staked BTC at a 1:1 ratio. tlBTC can be used as a staking certificate to enjoy Babylon staking rewards, it can also be used as a liquidity asset in the DeFi ecosystem, or as a native asset for cross-chain settlement.

Chakra has recently launched joint testnets with Babylon multiple times, consistently maintaining the top position at each stage. In the latest Testnet-4 Cap 3, Chakra ranked as the number one Finality Provider for Babylon, with a total confirmed TVL of 258.401 sBTC, accounting for 36% of Babylon's total TVL.

Summary

The BTC staking of Babylon is about to go live, which will bring a huge change to the BTC ecosystem. First, BTC staking will significantly increase the overall asset yield, rising from the current 0.01%-1.25% to between 5%-20%. This increase in yield will trigger a positive flywheel effect, driving the development of the BTC ecosystem.

Unlike ETH staking, BTC staking is more similar to the restaking business of eigenlayer, making it difficult to form a monopoly by giants, and the motivation for exchanges to participate is also relatively weak. This provides a good development opportunity for early projects, and investors can expect high returns from rapid growth.