A look at the hottest Bitcoin liquidity staking agreements

Author: Lorenzo Protocol Translation: Mars Finance, Daisy

The field of Bitcoin liquidity staking protocols is expanding rapidly, as Bitcoin’s technology has generally progressed faster in the past few years.

The liquid staking protocol built on Bitcoin has only been born less than a year, but when entering this new field, there are already a large number of pledge protocols available to consider.

To briefly review, the Bitcoin liquidity staking protocol is a system that allows Bitcoin holders to pledge their Bitcoins in some way, allowing them to receive rewards or gains while still gaining underlying liquidity.Bitcoin is often used to protect Proof of Stake (PoS) networks, but other use cases exist, such as participating in a stake-based oracle network.At the same time, holders can still obtain liquidity value equivalent to their staked Bitcoin in the form of derivative tokens.

In addition to enabling Bitcoin holders to generate revenue at the bottom, the liquidity staking protocol allows users to safely transfer Bitcoin to the Bitcoin Layer 2 network, thus unlocking Bitcoin for more flexible decentralized finance (DeFi).) form.Like any other category of DeFi protocols, different liquidity staking protocols on Bitcoin tend to focus on different segmentation functions and attributes that set them apart from other options on the market.In addition, many liquid staking protocols on Bitcoin are supported by the creation of Babylon, a protocol that handles Bitcoin staking protocols at the bottom of the Bitcoin blockchain.

Some of the most famous Bitcoin liquid staking platforms are Lorenzo Protocol, Bedrock, Botanix, pSTAKE Finance and UTXO Stack, but more platforms emerge every day.Let’s take a closer look at what each of these Bitcoin staking solutions has and what are the differences between them.

Lorenzo Protocol

Main features

Liquid staking tokens are divided into income accumulation tokens and liquid principal tokens
Supports cycle and leverage pledge
Currently focused on Babylon, but can also be integrated with other high-quality Bitcoin staking projects
Achieve a simple and easy-to-understand staking process through the Bitcoin liquidity staking plan provided by professional providers
No minimum pledge requirement
Released

The Lorenzo protocol aims to act as the main layer of Bitcoin liquidity financing, promoting the growing global demand for Bitcoin through innovative Bitcoin layer 2 networks that bring DeFi capabilities to the world’s most popular and trusted encryptioncurrency.Through Babylon’s Bitcoin Sharing Security Protocol, Lorenzo can stake Bitcoin liquidity into a proof-of-stake chain in exchange for profit.

Lorenzo also takes Babylon’s capabilities to the next level by creating an efficient market for Bitcoin holders, finding the best investment opportunities for their unused Bitcoin liquidity through its Bitcoin Liquidity Staking Program (BLSP).The project can outline the purpose of staking Bitcoin and the relevant rewards of the stakinger.Each BLSP details the rules and rewards for staking and has a fixed staking cycle for consistency.

In addition, Lorenzo transforms the staked Bitcoin tokens into liquid principal tokens (LPT), representing the right to recover the staked Bitcoin principal and the income accumulation token (YAT), representing the income generated by the staked Bitcoin collateral.This way, users can easily separate the underlying Bitcoin collateral from the benefits generated when using this liquidity in various DeFi applications.

The staking Bitcoin tokens into separate LPT and YAT tokens also support looping and leveraged staking.Recycled staking utilizes external DEX partnerships, allowing users to pledge BTC, borrow more BTC and increase staking rewards.Leveraged pledge simplifies the process by providing internal liquidity, allowing users to apply maximum leverage in a click.Both products are designed to improve capital efficiency and optimize pledge returns.

While liquid staking for Bitcoin remains a new concept, Lorenzo is one of the few products that have been launched, at least in its basic form.Additionally, Lorenzo does not have a minimum pledge amount because user funds are brought together to democratize access to the Bitcoin staking process.

While Lorenzo is currently focused on Babylon, it can technically integrate with any other Bitcoin staking project that appears.

Bedrock

Main features

Provides BTC, ETH and IOTX staking
Bitcoin integration is limited to two ERC-20 tokens issued on the Ethereum network
Using Wrapped Bitcoin instead of native Bitcoin introduces high centralization
Re-private tokens will not separate principal deposits and income
Using Babylon

Bedrock is a multi-asset liquidity re-staking protocol developed in partnership with blockchain infrastructure company RockX.Supporters of the project include Babylon co-founder Fisher Yu, IoTeX founder Raullen Chai and OKX Ventures.

Bedrock not only focuses on Bitcoin, it also allows users to restake ETH and IOTX (the native token of IoTeX).It is worth noting that Bitcoin integration is limited to users of Wrapped Bitcoin (wBTC) and FBTC, which are Bitcoin-backed ERC-20 tokens on Ethereum.wBTC is restaking through Bedrock’s uniBTC agreement through its cooperation with Babylon.This integration allows wBTC and FBTC holders to receive staking rewards on the Ethereum network; however, it is important to note that wBTC is a highly concentrated asset because BitGo is its sole custodian.

Bedrock’s product suite includes liquidity re-staked tokens (LRTs) for wBTC, ETH and IOTX.Bedrock utilizes universal (uni) standards to maximize the liquidity and value of these PoS tokens through its uniBTC, uniETH and uniIOTX products.This universal token model ensures that staked PoS tokens in Bedrock represent not only principal assets, but also all future staking rewards.The non-rebase nature of uniTokens means that their value will increase over time rather than quantity, allowing holders to benefit from the growing value of each token, while also from EigenLayer and Bedrock’sGet extra points in the reward system.

pSTAKE Finance

Main features

Supported by Binance Lab
Built based on Babylon
Bitcoin cannot be unsolicited at this time
50 Bitcoin deposit cap
Liquid staking tokens to be launched on Ethereum in September 2024
Will increase the ability to pledge wBTC
Have your own native token, PSTAKE

pSTAKE Finance is a Bitcoin earning and liquid staking protocol powered by Binance Labs and built on Babylon.The protocol is now online with a maximum pledge of 50 bitcoins.However, pSTAKE Finance stakeholders are currently unable to unstake or withdraw their Bitcoins in the current first protocol version.In addition, the liquidity staking aspect of the protocol has not yet been launched, but pSTAKE Finance plans to offer LST on Ethereum starting in September 2024.

Much like Lorenzo Protocol and Bedrock, the pSTAKE Finance platform enables users to deposit their Bitcoins and contribute to the security of various application chains, earning rewards through the Babylon Bitcoin staking protocol.As these PoS chains begin to leverage Bitcoin to ensure security, pSTAKE will manage these benefits and distribute them to users.

Looking ahead, pSTAKE Finance plans to launch their V2, when yBTC LST will be launched on Ethereum.This new token is designed to provide automatic compounding of Bitcoin earnings and will eventually be integrated into the major DeFi ecosystems of various blockchains.The agreement is committed to augmenting its earnings products and making Bitcoin more accessible, including options for pledging wBTC and other Bitcoin derivatives.

Additionally, pSTAKE Finance focuses on developing its token economics and launching a fully autonomous custodial Bitcoin earnings solution that ensures users’ security and accessibility.pSTAKE Finance also has its own native governance and incentive token PSTAKE.

Swell Network

Main features

Uncustodial staking: Swell allows users to pledge WBTC directly from uncustodial wallets, ensuring full control of assets.
Earnings Generation: swBTC generates revenue through restaking agreements such as Symbiotic, EigenLayer and Karak.
Liquidity: swBTC can be used as collateral in a lending agreement

Swell Network is traditionally an Ethereum liquidity staking platform, and recently launched a Bitcoin liquidity re-staking token called swBTC.This ERC-20 token provides liquidity for users who want to pledge Wrapped Bitcoin in protocols such as Symbiotic, EigenLayer, or Karak without locking assets.With swBTC, users can earn native gains from restake platforms while leveraging the token throughout the DeFi ecosystem.

UTXO Stack

Main features

Powered by ABCDE, OKX Ventures, CMS Holdings, and Matrixport
Stick to the roots of Bitcoin and adopt the UTXO model
Integrate with RGB++ protocol
Also integrated with Nervos Network, so it is not a Bitcoin-only solution

UTXO Stack provides developers with a technical framework that enables them to easily publish Bitcoin 2-layer solutions using Unspended Transaction Output (UTXO) architecture.It is worth noting that Bitcoin itself differs from most other Layer 1 cryptocurrency networks in that it uses this UTXO-based model rather than the more popular account-based setup.The Bitcoin liquidity staking protocol is supported by well-known cryptocurrency investors, including ABCDE, OKX Ventures, CMS Holdings and Matrixport.

UTXO Stack integrates the RGB++ protocol to enhance the security of Bitcoin Layer 2 networks by restaking Bitcoin, CKB (Native cryptocurrency for Nervos Network) and Bitcoin L1 assets issued through RGB++.UTXO Stack tries to become the “OP Stack + EigenLayer” of the Bitcoin world.

UTXO Stack’s adoption of RGB++ is its most unique property.Unlike many existing solutions that rely heavily on Ethereum EVM and bridging mechanisms, UTXO Stack and RGB++ remain closely linked to the Bitcoin mainchain and UTXO models.RGB++ allows the issuance and management of assets on Bitcoin, transactions are executed on the Nervos Network, and recorded as promises on Bitcoin.One of the main benefits of this approach is that it enables efficient “transaction folding” to reduce fees.Of course, the integration with the Nervos Network will discourage many Bitcoin purists.

Nomic

Main features

Plan to work with Babylon
Have an LST called stBTC (may be confused with the same name product of Lorenzo)
Have your own native token NOM to protect its Layer 1 network
Bitcoin and NOM will offer double stakes
Working in the Cosmos ecosystem

Nomic is a Layer 1 blockchain network that runs within the larger Cosmos ecosystem.Cosmos aims to create a more unified cryptocurrency ecosystem through interoperability across multiple blockchains, in addition to providing a viable expansion roadmap involving the use of separate chains for different specific use cases.

The Nomic DAO Foundation plans to include Babylon’s Bitcoin staking protocol into its decentralized, non-custodial Bitcoin bridge.The integration will introduce an LST called stBTC, allowing Bitcoin holders to benefit from staking and liquidity.Nomic will enhance its security model with dual staking support while leveraging staking Bitcoin and its native token NOM.

By leveraging Babylon’s technology, stBTC will enable Bitcoin holders in the Cosmos ecosystem to gain benefits while maintaining liquidity for cross-blockchain communications (IBC)-compatible DeFi protocols.Nomic’s approach allows real Bitcoin to be exchanged into nBTC tokens that can be freely transferred between IBC-compatible chains.These nBTC tokens are backed by real Bitcoin in reserves controlled by NOM token holders who are also validators of the Nomic chain.Through this system, users can pledge nBTC to cast stBTC.The pledge reward will be distributed through IBC inter-chain account transactions.

stBTC is currently available on the Test Network, allowing users to explore its features before its official mainnet launches.

PumpBTC

Main features

Built based on Babylon
Current versions use WBTC, BTCB, and FBTC on alternative layer 1 networks
Work with cryptocurrency custodians Cobo and Coincover
Smart contract audits performed by BlockSec
PumpBTC points receive additional rewards

PumpBTC plans to provide liquidity restaking solutions through Babylon.PumpBTC is designed to simplify and increase the benefits of Bitcoin holders, allowing users to pledge their Bitcoins and receive liquidity tokens immediately, thus bypassing the usual waiting period.Much like other projects on this list, with the goal of connecting the world of DeFi and Bitcoin, PumpBTC describes itself as an effective alternative to WBTC, providing a native DeFi ecosystem across multiple blockchainsEarnings Bitcoin.

Currently, PumpBTC allows users to deposit their Bitcoins into stakes through alternative Bitcoin derivative tokens issued on the Layer 1 network, such as Ethereum and Binance Smart Chain.Additionally, PumpBTC does not process user funds directly, as this aspect of the agreement is the responsibility of the custodial partners Cobo and Coincover.While PumpBTC smart contracts have been audited by blockchain security firm BlockSec, this serious reliance on multi-layer third-party custody may discourage many Bitcoin purists who prefer to stick to decentralized and license-free financial principles.Nevertheless, PumpBTC claims that they will eventually add the ability to directly stake native Bitcoins in the protocol.

In addition to PumpBTC users who can earn from their staked Bitcoin through Babylon integration, users can also receive additional rewards through PumpBTC points.Having said that, it is not clear what the exact future utility of these points is.As far as total rewards are concerned, Bitcoin stakers can earn their base stake annual percentage rate of return (APR), Babylon points, PumpBTC points and FBTC points on one platform, with more rewards expected to be added in the future.

Lombard

Main features

Supported by prominent industry leaders, including Franklin Templeton Investment and Polychain Capital
Based on Babylon
Currently focusing on making LBTC the main way to use Bitcoin in DeFi
In addition to Babylon pledge rewards, you can also earn Lombardy points
Supported by a security alliance composed of DeFi industry leaders
Currently in private testing phase

Lombard aims to establish a common standard for Bitcoin and is supported by ecosystem partners.The main focus of the protocol is to allow earnings to move across chains seamlessly without disrupting liquidity, potentially bringing a large amount of new unexplored capital into DeFi.

Lombard’s core product, Liquid Bitcoin (LBTC), provides 1:1 support, earnings-generating cross-chain liquid Bitcoin, allowing holders to retain access to their capital and actively participate in DeFi activities such as staking and transactions.Currently, in Phase 1 of the Ethereum main network, Lombard is conducting private testing, and some users can stake Bitcoin and mint LBTC.In Phase 2, Lombard will open LBTC to the public and set deposit caps and waitlists to manage demand and reward early participants.

The governance and promotion of LBTC is also supported by the Security Alliance, whose mission is to highly integrate Bitcoin tokens into existing DeFi protocols and blockchains.Nonetheless, Lombard has not yet announced a specific member of the Security Alliance.

Bitcoin holders can earn a range of benefits through Lombard, including PoS staking, Lombard rewards and DeFi opportunities.Other DeFi protocols can also benefit from LBTC by creating new earnings primitives, while the target blockchain may see a lot of new liquidity, with billions of dollars of Bitcoin being integrated into these DeFi-focused chains.in the application.

Lombard’s mission is to position Bitcoin as not only a store of value, but also a key player in DeFi, which can be used to make money, stake, trade and transfer at scale.Their vision is to treat Bitcoin as a universal DeFi primitive, as the best collateral for the entire ecosystem, and to provide enhanced security to the PoS network through the stability supported by Bitcoin.

Chakra

Main features

Provide Bitcoin re-stake
Based on zero-knowledge proof, self-custodial pledge is realized
Create ChakraBTC and ChakraETH
The Chakra chain acts as a middleware chain between Bitcoin and its layer 2 network

As a Bitcoin restake protocol, Chakra seeks to unlock the full economic potential of Bitcoin by leveraging advanced zero-knowledge proof-of-knowledge (ZKP) technology.The core challenge Chakra solves is how to enable Bitcoin holders to benefit from staking gains without compromising the custody security of staking Bitcoin.This is achieved through Cobo’s Babylon-driven self-hosting and MPC-driven hosting (multi-party computing).

Chakra offers a unique solution by enabling self-custodial staking, allowing Bitcoin holders to pledge assets without having to transfer them out of their wallet.Time lock scripts are also building blocks for Lightning Networks, used to eliminate third-party risks sometimes associated with the staking process.Chakra also adopts ZKP, especially Scalable Transparent Knowledge Argument (STARK), to improve the security and scalability of the system.

In addition, Chakra supports a range of services maintained by stakeholders, including AI, DeFi and in-game applications.It facilitates the creation of a new Bitcoin Layer 2 network and the development of DeFi Bitcoin-backed derivatives, thus expanding utility and earning opportunities for Bitcoin holders.Most importantly, Chakra users are able to restake through Bitcoin, using the same collateral to stake on various networks simultaneously.

Chakra describes itself as a modular settlement network for the Bitcoin DeFi ecosystem built around a variety of different Layer 2 networks.It can also interoperate across various layer 1 networks, with the focus on creating an aggregational financial layer that unifies Bitcoin liquidity throughout the space.The Chakra Chain effectively acts as a middleware between the base Bitcoin protocol and any blockchain that wants to obtain secure Bitcoin liquidity.

Solv Protocol

Main features

Investors include Binance Lab and Blockchain Capital
UTXO-3525 supports cross-chain unmanaged bitcoin exchange
Issuing SolvBTC as a unified Bitcoin liquidity asset
Supports Bitcoin, Ethereum, BNB Chain, Botanix and many other blockchains
Audited by five independent companies
Compliance Bridge supports traditional finance participation

The Solv protocol aims to build a decentralized Bitcoin reserve that can be deployed throughout the DeFi field, which they call “BTCFi”.Through their SolvBTC tokens, they focus on unifying Bitcoin liquidity into one asset that can be used for all staking and other DeFi applications.

A long list of well-known investors support the Solv protocol, including Binance Labs, Blockchain Capital, CMS Holdings and Bing Ventures.In addition, the agreement has accepted five independent security audits from companies such as Quantstamp, CertiK, and others.

From a technical point of view, three key aspects of Solv are the Liquidity Consensus Network (LCN), UTXO-3525 and Compliance Bridge.The liquidity consensus network manages the decentralized Bitcoin reserves held in the Solv protocol through transparent, auditable records and cross-chain liquidity management.UTXO-3525 is a protocol used to transfer assets from the underlying Bitcoin blockchain to EVM-compatible blockchain.In addition to native Bitcoin, UTXO-3525 can also handle Ordindal, Runes, and other assets issued on top of Bitcoin.Compliance bridges are used to enable traditional financial institutions to participate in agreements while complying with their regulatory obligations.This includes the ability to tokenize U.S. spot bitcoin exchange-traded funds.

Currently, Solv Protocol has two independent LSTs in the form of SolvBTC.BBN of Bitcoin staked through Babylon and SolvBTC.ENA of Bitcoin staked through Ethena.In addition, Solv plans to realize Bitcoin earning opportunities through Ethereum, Binance Smart Chain, Botanix and some other blockchains.

Acre

Main features

Have a governance token called ACRE
Built on the tBTC decentralized Bitcoin Bridge, not Babylon
Bitcoin staker gets stBTC LST
Users can also earn Acre points
Currently running on Ethereum
Plan integration with Mezo Bitcoin Layer 2 network

As the liquidity layer of the Bitcoin layer 2 network, Acre provides Bitcoin accounting and Bitcoin accounting staking services.When Bitcoin is deposited into Acre, it mints stBTC, an LST that can be exchanged for Bitcoin 1:1.The deposited Bitcoin will then be invested in various income generation strategies on the Bitcoin Layer 2 network and DeFi platform, and the rewards will be accumulated into the stBTC tokens.This includes using the underlying Bitcoin as a proof of stake asset to provide security for Bitcoin’s Layer 2 network.The stBTC token contract is currently deployed on Ethereum.It will not be repriced based on its accumulated earnings, which means that the value of stBTC should increase over time, rather than the amount of stBTC the user holds.

It is worth noting that Acre uses tBTC, a secure, decentralized Bitcoin bridge that connects to Ethereum and other EVM-compatible blockchains.This is in stark contrast to other Bitcoin-backed tokens issued on the EVM chain, such as WBTC, which are fully centralized.Bitcoins deposited into Acre through the basic blockchain are converted to tBTC before staking.tBTC is supported by leading DeFi projects and plays a crucial role in achieving cross-chain coordination and enhancing the functionality of Bitcoin within the Acre system.

Acre is managed by a decentralized autonomous organization (DAO) and operates under the governance of users holding ACRE tokens.

The status of today’s products

Common topics and differences make the platforms different in the various liquidity staking platforms discussed in the research.

Flexibility and cross-chain integration

Most platforms emphasize cross-chain compatibility, allowing users to interact with multiple blockchain networks.For example, Chakra supports cross-chain liquidity flow, while Lombard supports staking across various networks, increasing users’ chances of earning profits.Similarly, Swell introduced a restake feature that enables Wrapped Bitcoin holders to take advantage of liquidity.

Revenue optimization and reward mechanism

All major platforms focus on generating revenue, but the Lorenzo protocol stands out with its leveraged staking option.It enables users to borrow more BTC for further staking by using staking Bitcoin as collateral, thereby maximizing earning potential.Lombard and Bedrock offer higher benefits through partnerships, while PumpBTC combines real-time staking transparency and points summary to unlock additional rewards.

BTCFi’s bright future

With the rapid development of the Bitcoin liquidity staking ecosystem, various protocols present exciting opportunities and unique features.

These innovations enable Bitcoin holders to gain benefits while maintaining liquidity, opening the door to diversified DeFi applications in the Bitcoin ecosystem.The diversity of Bitcoin liquidity staking protocols not only enhances user choice, but also stimulates further innovation in the Bitcoin DeFi field.

Going forward, the growth of Bitcoin liquidity staking protocols will redefine how Bitcoin holders interact with the broader blockchain ecosystem.As these platforms mature and expand, they are expected to unleash greater functionality and accessibility, making Bitcoin a more versatile and more productive asset.

As this field is still in its very early stages and many protocols have not yet been launched, it is crucial to track the latest developments in this new field of Bitcoin expansion.That being said, the number of new projects in this space shows a bright future for earning earnings through Bitcoin staking.