$BTC liquidity staking leverages cryptographic trustless mechanisms to enable secure Bitcoin staking on the mainnet, generating rewards that can be utilized in other #DeFi projects. This approach also tackles inflation and startup issues faced by smaller #PoS chains, offering Bitcoin holders a new way to earn.

@babylon_chain is a non-custodial Bitcoin staking solution that employs a trustless cryptographic method to achieve native asset staking on Layer 1 Bitcoin. By re-staking, it provides PoS security guarantees for other blockchains, generating rewards.

With Babylon staking, Bitcoin remains on the mainnet, with security ensured by the #PoW mechanism. The staking process operates entirely through cryptographic “Extractable One-Time Signatures” (EOTS) and does not rely on any third-party bridges or custodians. This has made it well-received and welcomed in the security-conscious Bitcoin community.

Babylon enables Bitcoin holders to earn staking rewards while maintaining security, pioneering the BTC staking sector, and fundamentally altering the BTC ecosystem. Additionally, introducing Bitcoin staking helps address inflation issues (to attract staking, relatively high inflation rewards are needed, such as 10-15% or even 20% tokens for a year) and the difficulty of starting up (building validation nodes requires significant capital) in smaller PoS chains.

BTC Liquidity Staking

Similar to the traditional liquidity token schemes for ETH, BTC liquidity staking aims to function like a savings account for Bitcoin, allowing users to deposit and withdraw at any time while earning interest. Additionally, the liquidity staking tokens can be used to earn returns in other DeFi projects (e.g., providing liquidity, lending, etc.). Staking on Babylon can be compared to a fixed-term deposit, offering higher returns but with less flexibility for withdrawals.

This model also opens up participation for Bitcoin users outside the mainnet, such as those holding wBTC on Ethereum, who can also participate in Babylon staking.

Essentially, liquidity staking can be seen as a way for the project to use users’ BTC for staking on Babylon, with the staking rewards used to pay interest to users. The liquidity staking tokens (bonds) issued to users can also be traded.

Currently, most of Babylon’s liquidity staking tokens are built on Ethereum, with plans to support multiple chains in the future. Apart from Lombard, where users directly stake on Babylon, other projects use a custodial model where the project team stakes on Babylon on behalf of users, with liquidity provided by third-party institutions.

pSTAKE

@pStakeFinance uses institutional custody for liquidity, with user funds staked to pSTAKE’s storage address. Liquidity is supported by custodians like Cobo, and the project team then stakes BTC to Babylon.

yBTC is the official liquidity staking token, which has not yet been issued but is expected to allow users to earn returns in other DeFi projects, such as providing liquidity or lending. Initially, yBTC will be issued on Ethereum, with plans to extend to other #L2 solutions.

Project Progress & Participation Opportunities

The v1 testnet involves depositing and withdrawing sBTC (testnet BTC) on pSTAKE. v2 will provide users with the ability to earn staking rewards from Babylon on the mainnet. v3 will mint the yBTC liquidity staking token, enabling users to use yBTC in other DeFi projects while earning staking rewards. v4 will diversify the types of rewards.

The project is currently in the v1 stage and has not yet launched a rewards program. It is expected to be introduced alongside the mainnet launch. Participation in the testnet staking will offer additional rewards. Currently, v1 has 44,813 users who have staked 40.65 sBTC.

Lorenzo

Lorenzo has implemented a principal and interest separation model similar to @pendle_fi‘s for Bitcoin liquidity solutions. The Lorenzo protocol aims to match Bitcoin holders with projects seeking Bitcoin liquidity. It issues bonds (yield accumulation tokens, YAT) to Bitcoin holders, then uses the Bitcoin liquidity to stake on Babylon.

Users send BTC to Lorenzo’s multi-signature wallet, which is then held in custody by staking agents (a trusted group of Bitcoin institutions and TradFi giants) and receives stBTC as a staking certificate. Lorenzo subsequently stakes the BTC with Babylon.

After securing Bitcoin liquidity, Lorenzo issues three types of tokens:

1. Liquidity Principal Token (LPT): This represents the tokenized form of redeemable BTC principal, with stBTC serving as Lorenzo’s official LPT.
2. Yield Accumulation Token (YAT): This represents the right to claim rewards from the staking project at the end of the re-staking period. YATs can be traded and transferred, but are non-transferable upon expiration. Users can claim project rewards based on their YAT holdings. YAT is an ERC-20 token issued through re-staking to the staking agents.
3. Staking Proof Token (SPT): After claiming rewards with YAT, the YAT automatically converts to an equivalent amount of SPT, which is placed in a unified queue and is non-tradeable. The sole purpose of SPT is to be burned in sequence when users burn stBTC to withdraw BTC. The agentID associated with the burned SPT determines which staking agent will redeem the BTC. If there aren’t enough SPTs in the queue, users must wait for new SPTs to enter the queue. Users generating SPT from YAT will have priority in using their generated SPT to redeem BTC.

Since both LPT and YAT can be traded, anyone holding YAT and LPT can use them to claim rewards and withdraw re-staked BTC.

LPT, like stBTC, can be seen as another form of wrapped Bitcoin, with Lorenzo aiming to eventually replace wBTC. The value of YAT comes from accrued yield and speculation on future yield, making YAT highly volatile. Trading pairs between stBTC and all YATs will be the base pairs. There may also be trading pairs involving LPT, YAT, and assets like ETH, BNB, and stablecoins, providing significant arbitrage and investment opportunities.

In lending protocols, borrowers can use LPT and YAT as collateral to borrow any required assets. In return, stakeholders have greater control over their investments and liquidity.

Project Progress & Participation Opportunities

Lorenzo’s mainnet will launch in two phases (Lorenzo Phase One and Lorenzo Phase Two).

Lorenzo Phase One focuses on testing the minting of stBTC from BTC and converting stBTC back to BTC.

Lorenzo Phase Two introduces staking agents to decentralize the management of users’ staked BTC and issue liquidity re-staking tokens backed by BTC. Staking agents can issue YAT to represent the yield from users’ staked assets. When users claim project rewards using YAT, the YAT automatically converts into an equivalent amount of SPT, determining which staking agent will redeem the BTC.

Participating in pre-launch staking can earn rewards and points: https://app.lorenzo-protocol.xyz/staking

Lombard

@Lombard_Finance operates in a more decentralized manner, with user funds staked directly on Babylon rather than relying on a trusted third party for liquidity. The overall architecture consists of users, Bitcoin nodes, the backend, and a Consortium (which manages the staking process as a decentralized state machine using the Raft algorithm for consensus).

Lombard’s staking process is managed by the decentralized Consortium. Users send native BTC to the Consortium’s address. Once the backend detects a deposit at this address from a Bitcoin node, it triggers a deposit notarization process with the Consortium. The Consortium verifies the transaction, then stakes the BTC on Babylon and mints LBTC corresponding to the user’s staked amount.

Roles of LBTC

LBTC is Lombard’s liquidity staking token, allowing holders to earn native rewards through staking on Babylon. LBTC is exchangeable 1:1 with BTC and is cross-chain compatible, making it usable as collateral for lending protocols, perp DEXs, and other DeFi applications. In the first phase, LBTC will be issued on Ethereum, with plans to expand to multiple chains in the future.

Project Progress & Participation Opportunities

Lombard is currently in the first phase, running in Private Beta on the Ethereum mainnet. Eligible participants can stake native BTC and mint LBTC. Note that at this stage, Lombard only supports staking, not withdrawals. Keep an eye on updates for further developments.

The second phase will begin in a few weeks and will open LBTC to the public, while maintaining a deposit cap. The LBTC waitlist will manage LBTC demand and provide a mechanism to reward early participants with exclusive access and benefits over time.

LBTC Waitlist: https://lombard.finance/#LBTC_waitlist

Solv

@SolvProtocol tokenizes staking yields and restaking yields from BTC Layer2 (integrating Babylon) and DeFi yields from ETH Layer2 into SolvBTC. SolvBTC integrates seamlessly with other protocols, channeling Bitcoin liquidity into various application protocols. Solv currently supports Ethereum, BNB, ARB, and Merlin.

Solv employs a decentralized asset management architecture, including built-in security guards, price oracles, and token modules based on liquidity strategies, establishing trustless process standards through smart contracts.

Solv also uses a custodial model, with off-chain funds held by reputable custodians.

Roles of solvBTC.BBN

solvBTC.BBN is Solv’s official liquidity staking token, designed to integrate with various DeFi protocols.

Its functions include:

1. DEX: Provides instant liquidity and high-yield opportunities for solvBTC.BBN holders without requiring KYC.
2. Lending Protocols: Allows solvBTC.BBN holders to stake tokens for additional yield, while borrowers can obtain leveraged positions.
3. Yield Trading Protocols: Enables users to trade future yields of BBN, manage yield volatility, and optimize returns.

Project Progress & Participation Opportunities

Since its launch in April, SolvBTC has attracted over 12,000 BTC staked on Merlin Chain, Arbitrum, and BNB Chain, with 20,000 users participating.

Total Experience Points (XP) consist of three components: base points, accelerated points, and referral points. The total XP is the sum of these three types of points.

Basic points

Base points are earned by depositing funds into Solv Vaults. The more you deposit, the more base points you accumulate. Additionally, the longer you hold your deposits, the more base points you earn. Base points are calculated as follows: Base Points = (Points per Dollar Deposited) × (Holding Duration). Points are updated daily, with a snapshot of the value of staked funds in the Vaults taken each day. Note: SolvBTC purchased on the secondary market does not earn any points.

Accelerated points

To unlock Accelerated Points, you need to invite three genuine investors, with no minimum investment amount required. Your final point total is calculated as: (Base Points) × (Accelerator Card Coefficient). There are two types of Accelerator Cards:

1. XP Boost: Achieved after reaching certain investment thresholds. The higher the investment, the greater the multiplier. You can view your acceleration and the required amount to reach the next tier, along with the corresponding coefficient. This card offers significant marginal benefits.
2. Event XP Boost: Obtained through participation in events, valid for 7 days, and multiple cards can be stacked. In mid-April, the system will display the Accelerator Cards and their coefficients in your card wallet. There will be new rounds of Accelerator Card airdrops in the future.

Referral Points

Users earn 10% of their referrals’ base points (Basic XP), without affecting the total points of the referred users. There is no limit to how many users you can refer; the more genuine users you bring in, the more you can earn.

Bedrock

@Bedrock_DeFi, initially developed for the Eigenlayer ecosystem, has evolved into the largest staking entry point on IOTX, achieving nearly $200 million in TVL across both ETH and IOTX ecosystems.

Recently, with support and technology from Babylon, they developed the BTC liquidity staking protocol UniBTC, allowing Ethereum users to stake their wBTC with Babylon. Currently, UniBTC is operational on Ethereum.

Project Progress & Participation Opportunities

Users can hold uniBTC to earn Bedrock rewards and Babylon points. Note that while uniBTC cannot currently be unstaked, it can be sold directly as it is redeemable 1:1 with WBTC.

Master Protocol

Master Protocol is a yield aggregation platform that integrates BTC ecosystem projects such as Bouncebit (stBBTC), Babylon, and BitLayer, enabling users to stake or trade through the platform.

The two main products of Master Protocol are:

1. Master Yield Market: Provides yield trading opportunities and aggregates Bitcoin ecosystem assets, packaging them into MSY, which is then split into MPT (principal) and MYT (interest) for user trading.
2. LST Protocol on Botanix Spiderchain: A liquidity staking protocol designed to enhance Bitcoin liquidity and yield. It has not yet launched but will collaborate with Botanix in the future.

Master Yield Market

The basic function of Master Yield Market is to aggregate Bitcoin ecological assets, package them into MSY, and split them into MPT and MYT for users to trade. Its principle is similar to the Pendle protocol:

• MPT (Master Principal Token): represents the principal. Purchasing MPT can lock in the profits of the underlying assets in advance, which is equivalent to a fixed income product. Whales or institutions will love this low-risk product. Purchased funds are moved to the LST protocol and BTC L2.

• MYT (Master Yield Token): represents interest. The unit price of MYT is low, but it can improve the utilization rate of funds, which is equivalent to increasing leverage to speculate on expected returns. This part of the retail investors will prefer it, and the price will fluctuate.

Points program

The Master Yield Pass is an incentive introduced by Master Protocol, with a total of 10,000 passes available for free minting on Base as of June 24. All NFTs have been successfully minted. Benefits of staking a Master Yield Pass include:

1. Points from Trading Pool and Referral Pool: Accumulate points that can be exchanged for future token airdrops.
2. Platform Fee Dividends: Assuming a total trading volume of $200 million, with platform fees reaching millions of dollars, each NFT could earn over $100 in dividends. (For comparison, Pendle on Ethereum has accumulated trading volumes in the billions of dollars.)
3. Future Benefits: Whitelist opportunities for #NFT, events, #IDO, etc.

Chakra

@ChakraChain is a #ZK-powered shared modular Bitcoin settlement layer that provides unified settlement services for all Layer 2 networks, creating an aggregated liquidity and interoperability network to release Bitcoin liquidity across the entire blockchain ecosystem.

Funds in the Bitcoin network for Chakra are managed by the MPC solution provided by Cobo and staked with Babylon to earn staking rewards. After transaction retrieval and verification, tlBTC will serve as the staking certificate, allowing stakers to mint.

Roles of tlBTC

tlBTC corresponds 1:1 with the amount of BTC staked in the Bitcoin network. It has three main uses:

1. Staking Certificate: Users holding tlBTC can enjoy the staking rewards from the underlying Babylon protocol.
2. Liquidity Asset: Users can invest tlBTC into the DeFi ecosystem (DEXs, lending platforms, stablecoins) to earn additional yields.
3. Native Asset for Full-Chain Settlement: Utilizes Bitcoin’s liquidity and stability for high-efficiency, low-latency, and low-slippage settlements.

Project progress

Recently, Chakra has repeatedly topped the Cap stages in joint testnets with Babylon, maintaining a leading position throughout three Cap phases. In the latest Testnet-4 Cap 3, Chakra ranked as Babylon’s top Finality Provider, with a total confirmed TVL of 258,401 sBTC (36% of Babylon’s total TVL) and 171,142 staking delegations (37% of Babylon’s total staking delegations).

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Chakra has launched a points system on the testnet. Users earn 1 point per day for staking 0.0005 sBTC, and can earn 10% of the invited person’s points through referrals. The testnet supports both self-custodied staking and MPC staking, with points awarded for both methods.

Closing Thoughts

With Babylon’s BTC #staking on the horizon, the BTC ecosystem is poised for transformation.

BTC staking, like ETH’s DeFi, aims to enhance the overall yield of assets. Currently, the BTC yield market exceeds $10 billion, with yields ranging from 0.01% to 1.25%. In contrast, staking rewards on PoS blockchains often range from 5% to 20%. Staking BTC to provide yields for other PoS chains can generate returns tens of times higher than traditional BTC yields. Although some in the BTC community prefer to hold onto their coins, the increase in yield is tangible. Users can earn from their BTC holdings, with benefits spilling over into BTC Layer 2 and other ecosystems, creating a positive feedback loop.

BTC staking, spearheaded by Babylon, differs from ETH staking due to the lack of native yield on the BTC chain. Instead, it aligns more closely with @eigenlayer‘s #restaking model, with an ecosystem resembling that of the #LRT protocol within Eigenlayer.

As a result, the monopolistic tendencies observed in ETH staking are unlikely to emerge in BTC staking. Exchanges are also less incentivized to participate, as scaling does not necessarily equate to more stable profits. Early entrants in the BTC staking space have the potential to capture significant market share, offering investors the chance to reap substantial returns from rapid growth.

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