Overview of BTC Liquid Staking Track

Bitcoin holders can now earn staking rewards through Babylon, a non-custodial stake solution, while ensuring security. This opens up the BTC staking track and will fundamentally change the way the BTC ecosystem operates. At the same time, the introduction of staking BTC can also address the issues of inflation and startup difficulties for small and medium-sized POS chains.

BTC liquid staking

The BTC liquid staking program is similar to a demand deposit, allowing users to deposit and withdraw at any time while earning interest. Users can also use the liquid staking tokens in other DeFi projects to earn additional returns. In contrast, staking on Babylon is more like a time deposit, offering higher returns but without immediate withdrawal options.

Liquid staking is essentially where the project side borrows users' BTC to stake in Babylon, uses the staking rewards to pay users interest, while also issuing tradable bonds ( liquid staking tokens ) to users.

The main BTC liquid staking projects currently include:

pSTAKE

pSTAKE adopts an institutional custody liquidity model, where user funds are staked to the pSTAKE address, with liquidity support provided by institutions such as Cobo, and the project team then stakes BTC to Babylon.

yBTC is its official liquid staking token, planned to be issued on Ethereum and other L2s. The product is currently in the v1 testnet phase, with 44,813 users participating and staking 40.65 sBTC.

Lorenzo

Lorenzo has implemented a principal and interest separation business similar to Pendle. After being custodied by institutions, users' BTC is staked to Babylon, receiving stBTC as a certificate.

Lorenzo issues three types of tokens:

1. stBTC - A token redeemable for the principal amount of BTC
2. YAT - Represents the right to receive rewards at the end of the staking period.
3. SPT - Certificate for exchanging BTC

stBTC and YAT are tradable, creating arbitrage and investment opportunities for investors.

Lombard

Lombard adopts a decentralized architecture, where user funds are directly staked to Babylon. The overall structure consists of users, Bitcoin nodes, the backend, and the Consortium ( decentralized state machine ).

LBTC is its liquid staking token, redeemable 1:1 for BTC, can be cross-chain and used as collateral for DeFi. Currently in private testing phase, only staking is allowed, withdrawals are not permitted.

Solv

Solv integrates the Staking rewards from BTC Layer2, Restaking rewards ( Babylon ), and DeFi rewards from ETH Layer2, tokenized as SolvBTC.

Using a decentralized asset management architecture, off-chain funds are held by reputable custodians. solvBTC.BBN is its official liquid staking token.

Bedrock

Bedrock was initially developed for the Eigenlayer ecosystem and has now become the largest staking entry for IOTX. Recently, it was commissioned by Babylon to develop the UniBTC protocol, allowing Ethereum users to stake their wBTC to Babylon.

Master Protocol

Master Protocol is a yield aggregation platform that aggregates multiple BTC ecosystem projects. Its main products include:

1. Master Yield Market: Package BTC ecological assets as MSY, split into MPT( principal ) and MYT( interest ) for trading.
2. LST Protocol: liquid staking protocol, not yet launched.

Chakra

Chakra is a ZK-driven shared modular Bitcoin settlement layer that provides unified settlement services for layer two networks. Funds are custodied by Cobo and staked to Babylon, allowing users to mint tlBTC as a staking certificate.

BTC can be used as a staking certificate, liquidity asset, and native asset for cross-chain settlement.

Overall, BTC staking will greatly change the BTC ecosystem landscape and significantly improve the overall yield of BTC. Early projects have the opportunity to seize the market, and investors may also obtain high returns from rapid growth. However, since the BTC chain itself does not have native yields, the related ecosystem is more similar to the restaking business of eigenlayer, making it difficult to form a monopoly by giants.