Overview of BTC Liquid Staking Track

The Bitcoin staking program Babylon achieves the staking of BTC native assets through cryptography, providing POS security guarantees for other blockchains and generating profits. The Bitcoin staked under Babylon does not leave the mainnet, and its security is ensured by the PoW mechanism. The staking process operates in a cryptographic manner, without relying on third-party bridges or custodians. This allows BTC holders to earn staking rewards while ensuring security, creating a new avenue for BTC staking, and will also change the gameplay of the BTC ecosystem. Meanwhile, the introduction of BTC staking can solve the inflation and startup difficulties of small and medium-sized POS chains.

BTC liquid staking

The BTC liquid staking program is similar to ETH's liquidity tokens, aimed at achieving a demand deposit for BTC, paying interest while allowing liquid staking tokens to earn returns in DeFi projects. In contrast, Babylon staking is similar to a fixed-term deposit, offering higher returns but not allowing for immediate withdrawals.

Liquid staking can essentially be viewed as the project party borrowing users' BTC to stake in Babylon, using the staking rewards to pay interest. The bonds provided to users, (, and the liquid staking tokens, ), can also be traded. Currently, Babylon's liquid staking tokens are mostly built on Ethereum, with plans to support multi-chain in the future. Other than Lombard, most other projects adopt a custodial model, where the project party stakes on behalf of the users in Babylon.

pSTAKE

pSTAKE adopts institutional custody liquidity, users' funds are staked to the absorption address, with liquidity support provided by institutions, and the project party then stakes BTC to Babylon. yBTC is the official liquid staking token, which can generate returns in DeFi projects, originally issued on Ethereum and later expanded to L2.

Currently in v1 stage, there are already 44,813 users participating, staking 40.65 testnet BTC. It is expected that a points program will be launched when the mainnet goes live, and participating in testnet staking can earn additional points.

Lorenzo

Lorenzo has implemented a principal and interest separation service similar to Pendle. Users send BTC to a multi-signature wallet, which is hosted by a staking agent, 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 the official LPT
2. Accumulated earnings token ( YAT ): Represents the right to claim staking rewards and can be traded or transferred.
3. The staking proof token (SPT): automatically converts after YAT rewards are received, cannot be traded, and is used to sequentially destroy stBTC to withdraw BTC.

LPT and YAT are both tradable, and holders can claim rewards and withdraw BTC respectively. stBTC and other LPT can be viewed as another form of wrapped Bitcoin. The value of YAT comes from accrued yield and future收益投机.

Lombard

Lombard is more decentralized, users' funds are directly staked to Babylon. The architecture includes users, Bitcoin nodes, backend, and Consortium ( to manage the staking process in a decentralized state machine ).

Users send BTC to the Consortium address. After the backend detects the deposit, it triggers the deposit notarization process. The Consortium verifies the deposit and stakes BTC to Babylon, minting an equal amount of LBTC.

LBTC is Lombard's liquid staking token, redeemable 1:1 with BTC, cross-chain and can be used as collateral in DeFi. Initially issued on Ethereum, it later expanded to multiple chains.

Currently in the first stage, operating in Private Beta mode on the Ethereum mainnet, only staking is allowed, and withdrawals are not possible. The second stage will open LBTC to the public, maintaining a deposit limit.

Solv

Solv integrates BTC Layer2 staking and restaking yields ( with Babylon ) and tokenizes ETH Layer2 DeFi yield into SolvBTC. It adopts a decentralized asset management structure, with off-chain funds held by custodians.

solvBTC.BBN is the official liquid staking token, which can be integrated with DeFi protocols for DEX, lending, and yield trading.

Since its launch in April, SolvBTC has attracted over 12,000 BTC in stake and 20,000 users participating. The points consist of basic points, accelerated points, and referral points.

Bedrock

Bedrock was initially developed for the Eigenlayer ecosystem and later became the largest staking entry point for IOTX. It developed the BTC liquid staking protocol UniBTC under the commission of Babylon, allowing Ethereum users to stake their wBTC with Babylon.

Users holding uniBTC can receive Bedrock rewards and Babylon points. uniBTC cannot currently be unstaked, but can be sold in a 1:1 exchange with WBTC.

Master Protocol

Master Protocol is a yield aggregation platform that aggregates BTC ecosystem projects such as Bouncebit, Babylon, and BitLayer. The main products include Master Yield Market and the upcoming LST Protocol.

Master Yield Market will package aggregated Bitcoin ecological assets into MSY, splitting it into MPT( principal ) and MYT( interest ) for trading. Master Yield Pass is an incentive mechanism, allowing holders to earn points, platform fee dividends, and other rights.

Chakra

Chakra is a ZK-driven shared modular Bitcoin settlement layer, providing unified settlement services for layer 2 networks. Funds are custodied by Cobo's MPC solution and staked to Babylon, with tlBTC serving as the staking certificate.

BTC corresponds 1:1 with staked BTC, and can serve as a staking certificate, liquidity asset, and native asset for full-chain settlement.

Chakra performed excellently on the Babylon testnet, launching a points system to encourage stake.

Summary

Babylon's BTC staking will bring significant changes to the BTC ecosystem. It will greatly enhance the BTC asset yield, thereby initiating a positive flywheel effect. Unlike ETH staking, BTC staking is more similar to the restaking business of eigenlayer, making it difficult to form a monopoly among giants. Early projects have development opportunities, and investors may also gain high returns from rapid growth.