Bitcoin staking is just beginning: What staking products are available?

Author: Lucas Outumuro, Head of Research at IntoTheBlock; Translation: Jinse Finance xiaozou

In this article, we will introduce the outlook for the Bitcoin staking space, focusing on the core players and the architecture used to provide returns to Bitcoin holders, some of the limitations of the current state of Bitcoin staking, and some of the long-term potential and high returns that Bitcoin staking can provide.

Bitcoin staking has arrived

For the first time ever, it is possible to earn native returns on the Bitcoin network. While it is not "staking" as it is commonly described in proof-of-stake networks, multiple projects have recently launched that offer BTC returns.

The concept of restaking pioneered by EigenLayer is expanding to the Bitcoin blockchain and tokens pegged to BTC. In this regard, Babylon has become a major platform, building an architecture that allows applications to launch and utilize Bitcoin's cryptoeconomic security. In the Ethereum ecosystem, Symbiotic is another restaking protocol that accepts tokens like WBTC as collateral and will eventually support applications that want to use these assets as collateral.

Now let’s take a closer look at the major players in the Bitcoin staking space.

Over $500 million in collateral

In just a few weeks since Bitcoin restaking launched, over $500 million in assets have been deployed to Bitcoin staking protocols.

● Lombard is leading the way in Bitcoin staking, with nearly $300 million of their LBTC product staked on Babylon.

● Babylon recently raised $70 million, led by Paradigm, which greatly enhances the credibility that this technology will eventually build something similar to EigenLayer, but only for applications that seek to leverage the security of Bitcoin rather than Ethereum.

● Symbiotic, on the other hand, is focused on using assets that are already on Ethereum, such as WBTC and tBTC, which will eventually be entrusted to operators as a form of collateral, and if they act maliciously, they may lose a portion of their assets.

● EigenLayer has also announced that it will expand to support more assets, indicating that BTC tokens will also soon be involved in their re-staking service.

How does Bitcoin staking work?

It combines Bitcoin’s security layer with Ethereum’s DeFi ecosystem.

● LBTC is minted by sending BTC to a consortium address stored in the Babylon protocol, and then minting LBTC on Ethereum.

● Currently, funds are just held in the Babylon contract, no applications have been verified, and withdrawals are not enabled.

● Depositors are rewarded with points from Babylon and Lombard because they helped launch their supply side.

● Eventually, the BTC held by these contracts will enable the application ecosystem to leverage these assets to secure their own applications or chains running on Bitcoin.

Data is up?

With the rise of the Pendle market, the trading volume of Bitcoin-collateralized tokens has been climbing.

● The Pendle protocol allows traders to buy or sell future earnings on tokens such as LBTC and eBTC.

● Currently, the Pendle market has an expected yield of 7%-9% on these Bitcoin-collateralized tokens.

● In less than two weeks, the eBTC and LBTC markets on Pendle have attracted over $40 million in liquidity.

● These tokens are likely to continue to grow as Bitcoin holders rarely receive such gains.

Bitcoin staking is just beginning

The total market value of different versions of staked BTC is less than 1% of the wrapped token market value.

● WBTC’s market value has dropped by nearly 2,000 BTC (about $120 million) since news of Tron’s connection to potential token acquirers surfaced.

● Meanwhile, Coinbase recently launched their wrapped token cbBTC, a serious contender for dominance with WBTC.

● Despite no earnings, cbBTC’s market cap surpassed $100 million in 24 hours

● In the coming weeks, we may see people pledging Bitcoin collateral tokens to borrow wrapped tokens like WBTC and cbBTC to gain leveraged exposure to Babylon and Symbiotic.

This playout has played out before with the Ethereum LRT protocol and should greatly accelerate the development of the ecosystem in the foreseeable future. While all of this infrastructure is still in its infancy and the risks are significant, enthusiasm for Bitcoin staking is building and is likely to continue.