Due to its Proof of Work (PoW) consensus, Bitcoin’s potential for yield-related applications has been limited. Unlike Proof of Stake (PoS), Bitcoin lacks a native staking mechanism. However, with the rise of BTCFi, new methods are gradually emerging that allow Bitcoin to generate returns without compromising security. The BTCFi ecosystem is broadly divided into two parts: the BTC layer and re-staking, as well as asset protocols such as ARC20 and BRC20. This article will explore how emerging players in the BTCFi space are reshaping the Bitcoin re-staking landscape and compare their main advantages.

Current Landscape of Bitcoin Re-Staking

Bitcoin re-staking is not a new topic in this cycle, with established projects such as BounceBit, CoreDAO, and Stakelayer, as well as recent high-profile entrants like Babylon and Symbiotic.

Firstly, let’s analyze Babylon’s approach. Babylon’s Bitcoin staking solution includes several innovations aimed at enhancing security and user experience, setting it apart from other protocols:

• Remote Staking: Babylon employs Bitcoin’s UTXO model and scripting system for staking, slashing, and reward distribution. A notable advantage is that users who stake Bitcoin do not face slashing penalty risks; only node operators are affected. This means users’ Bitcoin is not at risk of loss but cannot be unlocked prematurely, providing high security.
• Timestamp Server: Babylon’s timestamp server records events from PoS chains onto the Bitcoin mainnet, providing tamper-proof timestamps. While the Bitcoin mainnet ensures these records cannot be altered once on-chain, the accuracy of the timestamps still relies on Babylon’s PoS network.
• Three-Layer Architecture: Babylon’s architecture is divided into three layers—Bitcoin as the base layer, Babylon as the middle layer, and PoS chains as the top layer. Babylon records PoS chain checkpoints onto the Bitcoin blockchain, ensuring data immutability. By using Cosmos as the middle layer, it enhances scalability and flexibility, attracting node operators and enabling native Bitcoin staking to support Babylon’s PoS network.

Although Babylon leads in native Bitcoin staking, it is not the only protocol exploring re-staking. Let’s look at two other prominent projects and their Bitcoin staking solutions:

• Symbiotic: Co-founded by Lido and Paradigm, Symbiotic is considered a direct competitor to EigenLayer. Symbiotic recently announced support for Bitcoin re-staking but currently only accepts WBTC staking. Unlike Babylon’s native Bitcoin staking, Symbiotic requires users to transfer Bitcoin to a third-party custodial address. To date, Symbiotic has staked 1,630 WBTC and incentivizes user participation through reward points.
• CoreDAO: CoreDAO offers two staking methods: native staking, which allows Bitcoin holders to delegate Bitcoin to Core validators without transferring funds; and custodial staking, where users send Bitcoin to a locking address and mint coreBTC on the CORE chain. Currently, CoreDAO only supports custodial staking.

These three projects aim to bring more use cases to the Bitcoin ecosystem and stimulate cross-chain communication or data sharing between Bitcoin and other chains. The re-staking platforms leverage modularity to share the security of the underlying network and empower AVS, providing infrastructure for widespread applications and significantly enhancing blockchain efficiency and performance.

Advantages:

• Babylon and CoreDAO shorten the PoS chain staking process through Bitcoin’s timestamp mechanism.
• Symbiotic benefits from support by Lido and Paradigm, gaining an edge in protocol collaboration and ecosystem advancement.
• Babylon is a pioneer in native staking, achieving trustlessness in Bitcoin staking.

Disadvantages:

• CoreDAO and Symbiotic still rely on third-party custody to address trust assumptions.
• Babylon’s PoW+PoS architecture has limitations in security logic, relying passively on Bitcoin’s network for accounting functions and not actively leveraging Bitcoin’s security.

Unlike Ethereum re-staking platforms, Bitcoin re-staking platforms do not directly transfer Bitcoin network security to their PoS networks, which is a key area for future development.

Bitcoin Re-Staking Ecosystem

Several protocols are now collaborating with the Bitcoin re-staking ecosystem, aiming to enhance the liquidity and utility of staked Bitcoin assets:

• Bedrock: As a leading project in Babylon’s first round of pre-staking, Bedrock holds about 30% of the market share. It supports staking WBTC to mint uniBTC. After Babylon’s mainnet launch, users will be able to earn rewards from both uniBTC and Babylon staking, with the potential to receive airdrops through Bedrock’s Diamonds program.
• Lombard: Lombard allows users to stake Bitcoin through Babylon, with Lombard managing the re-staking process. When users stake Bitcoin, Lombard mints an equivalent amount of LBTC on Ethereum. Users can use LBTC to participate in DeFi activities, enjoying the flexibility of cross-chain yields.
• Lorenzo: Lorenzo offers liquid staking and re-staking through a principal-yield separation model, enabling users to stake Bitcoin or BTCB to receive stBTC (liquid principal token) and YAT (yield token). This dual-token system allows users to earn Babylon’s native staking rewards while accumulating Lorenzo points.
• Pell Network: Pell is the first security network built on Bitcoin re-staking and operates on Babylon’s AVS network. Pell’s TVL exceeded $200 million within three weeks, with over 410,000 unique addresses. Pell provides four re-staking options, ranging from native Bitcoin staking to staking LP tokens with liquid BTC derivatives. Its AVS architecture enables it to capture significant revenue from middleware, oracle services, and modular chains.
• PumpBTC: Allows users to stake WBTC or BTCB and receive pumpBTC tokens on a 1:1 basis. What sets PumpBTC apart is that the re-staking process is handled by third-party custodians (e.g., Cobo and Coincover). Users benefit from yields without direct interaction with the protocol, simplifying the staking process.
• Solv Protocol: Solv has developed a cross-chain Bitcoin asset liquidity layer, supporting cross-chain bridging of WBTC on Arbitrum, BTCB on BNB Chain, and BTC.b on Avalanche. Users can earn XP points by holding solvBTC, participating in lending protocols, or adding liquidity to pools. Additionally, although Babylon’s mainnet is not yet live, users can still bridge to Babylon via Solv’s vault to earn more points.
• Stakestone: Expected to adopt a model similar to ETH-STONE, users will stake native Bitcoin to Babylon and mint yield-bearing STONEBTC for cross-chain liquidity. Users can earn points from various ecosystems, such as 2x Scroll points.

Conclusion

Transforming Bitcoin into an income-generating asset is of significant importance. Bitcoin re-staking is a valuable complement to Bitcoin’s “digital gold” definition, greatly enhancing its liquidity. Unlike the Ethereum ecosystem, BTCFi protocols, such as Babylon, Symbiotic, and CoreDAO, do not rely on pre-existing infrastructure, presenting both challenges and opportunities. Platforms like Solv, Lombard, and Lorenzo are progressively developing, focusing on multi-reward systems, security, flexibility, and dual-incentive models, respectively. BTCFi is still in its early stages, with rapid advancements in technology and ecosystems. We will continue to monitor developments in this area.

Disclaimer：

1. This article is reprinted from [chaincatcher]. All copyrights belong to the original author [Kevin, Caiya researcher from BlockBooster]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.