BTC Staking is an important narrative for L2

Author: blockpunk Source: X, @blockpunk2077

1.The narrative of BTC asset launch has come to an end

The narrative of BTC asset launch has come to an end. Memecoin can always be played, but it is not the final form of the BTC ecosystem. The narrative of BTC asset interest will soon become the mainstream.

Represented by Babylon, by staking BTC to provide economical security for other Pos chains, and obtaining income through staking, this has opened up the track of BTC staking, and will completely change the way of playing the BTC ecosystem, from playing with BTC principal to playing with BTC interest.

BTC staking is driven by two important narratives. The first is to increase the yield of the overall assets, just like ETH's DeFi.

According to DefiLlama data, the current market size of BTC interest-bearing exceeds 10 billion US dollars, with a yield of between 0.01% and 1.25%, which generally needs to be entrusted to a third-party CeFi institution. The staking rewards of PoS blockchains often range from 5% to 20%, and the income from staking BTC to provide staking for other PoS chains will not be too low. BTCStaking can obtain 50 times the income of traditional BTC interest-bearing, which will be a huge growth point.

The second point is the hot background of BTC L2, which fills the narrative gap between L2 and BTC. There are nearly 80 BTC L2s on the market, and if the BTC mainnet block is completely filled with DA, it can only carry 20 L2s at most. Many L2s have already made a second choice and changed the frequency of uploading BTC data to once every few months. How can these BTC L2s, which use centralized custody bridges for assets, whose security is not guaranteed by BTC, and are built using EVM, convince the community to be related to the BTC ecosystem? There is a huge narrative gap here.

Obviously, being able to serve as a validator network for Babylon or BounceBit and being reduced to BTCL2s brings huge legitimacy, and at the same time, being able to get the overflow of Staking BTC as soon as possible through PoS interest generation will obviously benefit the token and the ecosystem more directly.

Of course, the market situation faced by Eigenlayer, the restaking project of ETH, is different. Most BTC holders are passive holders, and 67% of BTC holders have not moved for more than 1 year. Therefore, it is difficult to convince BTC holders to participate in staking.

At the same time, BTC staking does not have native currency interest like ETH staking. The interest is often L2's own tokens, which has certain risks. Of course, some L2s that use BTC as gas fee also try to distribute the BTC received from the handling fee to staking users, but this is obviously enough to support it.

To put it bluntly, the significance of BTCL2's existence is to attract (ignore) BTC deposits, and BTC Staking is a more efficient way.

In addition to Staking, we also think about the performance of BTC. Building L3 based on the existing mature L2 stake is not a pseudo-demand, but a necessity. Projects like Nubit that can make L2 nested with DA or CBK's UTXo Stack framework can gain greater advantages in technology selection.

Second, @babylon_chain

Babylon uses cryptography to provide POS security guarantees for other blockchains through the native staking of the BTC layer.

Babylon's pledge is a cross-chain pledge. The pledged bitcoins are retained in the script on the Bitcoin network. The pledger can specify the selected validator and earn the validator income on the corresponding POS chain.

At the technical implementation level, the Babylon pledge process is completely operated in the cryptographic way of "extractable one-time signature EOTS", without relying on any third-party bridges and custodians. Babylon has also functionally designed a complete BTC Staking that includes confiscations. If the pledger (who is also the validator of this POS chain) remains honest and only signs one valid block at a time, it will receive the validator reward of the POS chain; if it tries to do evil and signs two blocks at the same block height at the same time, then its EOTS private key will be reversed, and anyone can use this private key to transfer the pledged BTC on the BTC chain to achieve confiscations.

Currently, Babylon is staking on the testnet and will launch the next SBTC test in May. It will also start pre-deposits in the second half of the year, and the token may be issued at the end of the year. Babylon revealed in space that it will also issue liquid assets (similar to stETH) that pledge BTC. Subsequent restaking and lrt and lst projects currently have @Chakrachain@LorenzoProtocol @yalaorg @SataBTC .

Third, @ChakraChain

Chakra is a BTC staking & restaking protocol. The BTC deposited by users will be invested in BTC Staking protocols such as Babylon to obtain multiple benefits. At the same time, Chakra provides verification services maintained by Staker to provide security for BTC L2.

Chakra aggregates the signatures of a series of users through the MuSig2 protocol to generate a UTXO containing a time lock, which can "pledge" Bitcoin within a certain period of time to complete the pledge action. Bitcoin holders do not need to transfer BTC to any third-party custody address, but instead use a derived address to achieve "1-layer self-custody."

There are only two conditions for unlocking the BTC UTXO after staking: one is that the Chakra network and the user sign together and then retrieve it. This may be that the user has initiated a request for early unlocking in the Chakra network, which provides flexibility; the second is that when the initial lock-up period is reached, the user will automatically gain control of these BTCs, and even after the Chakra network stops running, the user can still withdraw BTC on time.

Unlike Babylon, which also uses self-custody BTC staking, the Chakra network does not have the ability to confiscate the BTC staked by users, but instead guarantees consensus by cutting consensus rewards, which further avoids some possible erroneous confiscations that threaten the user's BTC assets.

Chakra also introduced ZK capabilities into the BTC staking ecosystem, and obtained Starkware, ABCDE, Bixin, and Coin Summer's investment. The testnet is currently underway, and you can go to chakrachain.io/devnet to connect your wallet to receive proof of early participation.

Fourth, @build_on_bob

BOB is a BTC EVM sidechain architecture implemented using the OP Superchain SDK, using packaged BTC on ETH such as wBTC and tBTC as gas fees. In the future, the security of BTC will be introduced through a new POW merged mining protocol.

The BOB testnet has been running for several months and has a certain ecology. The mainnet will be launched on May 1st. The first phase of deposit activities is currently underway. The Spice points accumulated by deposits correspond to the future $BOB tokens, which will be directly TGE after the mainnet is launched.

BOB has strong resources. It has launched BTCL2 in cooperation with $MARA, the largest listed mining company in the US stock market, and has just announced a $10 million investment from Coinbase. It can be regarded as a project benchmarking Binance and bouncebit. At present, BOB's first deposit TVI is currently around $250 million, which has great potential.

Deposit link:fusion.gobob.xyz/?refCode=cdmzz5

V.@BotanixLabs

BotanixLabs has built an EVM equivalent L2 on Bitcoin, which is run by POS. Users can deposit BTC into a multi-signature address to participate in L2 staking, or bridge BTC to L2 to participate in the ecosystem. Its feature is that these BTC assets are protected by a decentralized multi-signature network Spiderchain.

You can participate in PoS and multi-signature network Spiderchain by staking BTC to become a validator node. Botanix uses the Bitcoin block hash value as the source and randomly selects nodes to participate in PoS block generation. A block header after a segment is realized will be engraved into the BTC block to complete the final confirmation.

The settlement layer of BotanixL2 is BTC, and its gas is also BTC from the collapsed chain. Its consensus also uses the security of BTC as a guarantee.

L2's assets on BTC are all protected by the multi-signature network Spiderchain, and the nodes also randomly form multi-signature groups to control the BTC in the multi-signature address. The cost of nodes doing evil is high because their pledged BTC can be confiscated.

Currently, Botanix's testnet has been running for half a year, botanixlabs.xyz/en/testnet, users can participate in the test and receive a series of NFT certificates. BotanixLabs has been building L2 on BTC since 2022 and has certain technical strength. Its testnet is a good opportunity to participate.

Six, @bounce_bit

BounceBit is a BTC-based interest-earning and restaking infrastructure. BounceBit attempts to integrate CeFi and DeFi businesses in BTC interest-earning, and uses BTC pledge to guarantee the security of the blockchain.

BounceBit itself is also a BTC EVML2. In addition to staking its native token BB, L2's PoS staking can also pledge BTC assets.

At the same time, the BTC assets absorbed by BounceBit (including mainnet BTC and BTCB and WBTC on BNBChain) are all hosted in centralized custody services supported by Mainnet Digital and Ceffu, which is the only institutional custody service used by Binance. BounceBit attempts to eliminate BTC users' concerns about security through this endorsement.

The BTC assets deposited by users become bounceBTC on BounceBit. Users can choose to pledge these BTC to other validator networks, such as EVM chains, decentralized bridges and oracles to earn verification income from these networks.

BounceBit brings triple benefits to users through a series of businesses. The mainnet BTC assets are hosted in cefi such as Binance to obtain stable income. Users can also earn bb tokens by staking on the bouncebit chain, or restaking to other validator networks to earn rewards, or use them for AMM, lending and other DeFi business. BounceBit is supported by Binance and will provide 8% of the tokens to BNB stakers in the Binance Megadrop.

Seventh, @MezoNetwork

Mezo is a BTCL2 built on tBTC. It uses the architecture of CosmosEVM and realizes the asset transfer from BTC to Mzeo l2 through tBTC's multi-signature cross-chain bridge.

Mezo's feature is the introduction of a Ponzi economics called HODLProof, which is similar to ve33 of BTC staking. Users can lock BTC on Mezo to participate in consensus. The longer the lock-up time, the more times the stake verification weight is multiplied, and the higher the reward.

Mezo's PoS is divided into two parts, the BTC part and the native token MEZO part. Both can get veMEZO as a reward. The incentives are divided into different incentive pools, and the total incentives are 1/3 is obtained by BTC pledgers, and 2/3 is obtained by MEZO pledgers.

On April 9, Bitcoin's second-layer network Mezo completed a $21 million Series A financing, led by Pantera Capital, with participation from Multicoin, HackVC, Draper Associates, etc.

Currently, Mezo has started early deposit activities, and can now deposit and withdraw native BTC, wBTC and tBTC. It is expected to launch the Mezo mainnet in the second half of 2024.

VIII.@LorenzoProtocol

A Bitcoin liquidity pledge protocol built on Babylon, providing L2-as-a-service rapid deployment services. Lorenzo attempts to lower the participation threshold of BTC staking projects such as Babylon, reduce the risk of confiscation for pledgers, and release the liquidity of pledged BTC assets.

Babylon is a relatively low-level BTC staking protocol, which is similar to the native staking of ETH and may have certain requirements for the minimum number of BTC staked.

At the same time, for individual users, the staking income is not stable, but there is a risk of being fined. Therefore, it is necessary to participate in the liquidity staking protocol of BTC Staking as a risk-return unit by rewarding the BTC staking pool. This is what the Lorenzo protocol is going to do, which is similar to Lido.

Stakers can wish to participate in the pledged PoS chain and deposit their Bitcoin into the corresponding Lorenzo delegation vault, which is a Bitcoin multi-signature address.

The staker can obtain an equal amount of stBTC on Lorenzo's own chain as a proof of liquidity for participating in Babylon's Bitcoin pledge, and use it to receive pledge income.

The Lorenzo chain itself is protected by Babylon Bitcoin's shared security, EVM-compatible Bitcoin L2, and will also use a modular approach to help more BTCL2 deployments in the future. The Lorenzo chain serves as a direct interoperability chain for these L2 chains.