The field of Bitcoin liquid staking protocol is rapidly expanding as Bitcoin’s technological development has generally progressed faster over the past few years. Liquid staking protocol built on top of Bitcoin are less than a year old, but there are already a wealth of staking protocols to consider when venturing into this new space.
To briefly review, the Bitcoin Liquid Staking Protocol is a system that allows Bitcoin holders to stake their Bitcoins in a way that allows them to receive rewards or yields while still having access to the underlying liquidity.
These Bitcoins are typically used to secure proof-of-stake (PoS) networks, but other use cases exist, such as participating in stake-based oracle networks. At the same time, holders can still receive a liquid value equivalent to their staked Bitcoin in the form of derivative tokens.
In addition to enabling Bitcoin holders to generate underlying income, the Liquid Staking Protocol also allows users to securely transfer Bitcoin to the Bitcoin Layer 2 network, thereby unlocking Bitcoin for more flexible decentralized finance. (DeFi) form. As with any other category of DeFi protocols, different liquid staking protocol on Bitcoin tend to focus on different niche features and attributes that set them apart from other options on the market. Additionally, many liquid staking protocol on Bitcoin are powered by the creation of Babylon, a protocol that handles Bitcoin staking protocols at the bottom of the Bitcoin blockchain.
Currently, some of the most well-known Bitcoin liquidity staking platforms are Lorenzo Protocol, Bedrock, Botanix, pSTAKE Finance, and UTXO Stack, but more are emerging every day. Let’s take a closer look at what each of these Bitcoin staking solutions has to offer and how they differ from each other.
Lorenzo Protocol
Main features
- Liquidity pledged tokens are divided into income accumulation tokens and liquid principal tokens
- Supports loop and leverage staking
- Currently focused on Babylon, but can also be integrated with other quality Bitcoin staking projects
- A simple and easy-to-understand staking process with a Bitcoin liquidity staking program from a professional provider
- No minimum staking requirements
- Launched
The Lorenzo Protocol is designed to serve as the primary layer for Bitcoin liquidity financing, facilitating the growing global demand for Bitcoin through innovative Bitcoin Layer 2 networks that bring DeFi capabilities to the world’s most popular and trusted of cryptocurrency. Through Babylon’s Bitcoin Sharing Security Protocol, Lorenzo can stake Bitcoin liquidity onto the proof-of-stake chain in exchange for yield.
Lorenzo also takes Babylon's functionality to the next level by building an efficient market for Bitcoin holders to find the best investment opportunities for their unused Bitcoin liquidity through its Bitcoin Liquidity Staking Program (BLSP) Floor, where the project can outline the uses of staking Bitcoin and the associated rewards for stakers. Each BLSP details the rules and rewards for staking, and has a fixed staking period for consistency.
In addition, Lorenzo tokenizes the pledged Bitcoin into Liquid Principal Tokens (LPT), which represent the right to recover the principal amount of the pledged Bitcoin, and Yield Accumulation Tokens (YAT), which represent the income generated by this pledged Bitcoin collateral . This allows users to easily separate underlying Bitcoin collateral from the returns generated when using that liquidity in various DeFi applications.
Tokenizing staked Bitcoin into separate LPT and YAT tokens also supports rolling and leveraged staking. Loop staking leverages external DEX partnerships, allowing users to stake BTC, borrow more BTC, and increase staking rewards. Leveraged staking simplifies the process by providing internal liquidity, allowing users to apply maximum leverage with a single click. Both products are designed to increase capital efficiency and optimize staking returns.
While liquidity staking for Bitcoin is still a new concept, Lorenzo is one of the few products that is already live, at least in a basic form. Additionally, Lorenzo has no minimum staking amount as user funds are pooled together in an effort to democratize access to the Bitcoin staking process.
While Lorenzo is currently focused on Babylon, it can technically be integrated with any other Bitcoin staking project that emerges.
Bedrock
Main features
- Provide BTC, ETH and IOTX pledges
- Bitcoin integration limited to two ERC-20 tokens issued on the Ethereum network
- Using Wrapped Bitcoin instead of native Bitcoin would introduce a high degree of centralization
- Liquid restaking tokens do not separate principal deposits and earnings
- Use Babylon
Bedrock is a multi-asset liquidity re-hypothecation 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, but also allows users to stake ETH and IOTX (the native token of IoTeX). It’s worth noting that Bitcoin integration is limited to users of Wrapped Bitcoin (wBTC) and FBTC, which are ERC-20 tokens backed by Bitcoin on Ethereum. wBTC is re-staking through Bedrock’s uniBTC protocol through its partnership with Babylon. This integration allows wBTC and FBTC holders to earn staking rewards on the Ethereum network; however, it is important to note that wBTC is a highly centralized asset as BitGo is its sole custodian.
Bedrock’s product suite includes wBTC, ETH and IOTX’s Liquidity Recollateral Token (LRT). 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 staking PoS tokens in Bedrock represent not only the principal asset, but also all future staking rewards. The non-rebasing nature of uniTokens means that their value increases over time rather than quantity, allowing holders to benefit from the growing value of each token while also benefiting from EigenLayer and Bedrock’s Earn extra points in the reward system.
pSTAKE Finance
Main features
- Powered by Binance Labs
- Built on Babylon
- Bitcoin currently cannot be unstaked
- 50 Bitcoin deposit limit
- Liquidity Staking Tokens to Launch on Ethereum in September 2024
- Will increase the ability to stake wBTC
- Has its own native token, PSTAKE
pSTAKE Finance is a Bitcoin yield and liquid staking protocol powered by Binance Labs and built on Babylon. The protocol is now live with a maximum stake of 50 Bitcoin. However, pSTAKE Finance stakers are currently unable to unstake or withdraw their Bitcoin in the current first protocol version. Additionally, the liquidity staking aspect of the protocol is not yet live, 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 for security, pSTAKE will manage these earnings and distribute them to users.
Going forward, pSTAKE Finance plans to launch their V2, which will see yBTC LST launch on Ethereum. This new token is designed to provide automatically compounding Bitcoin returns and will eventually be integrated into major DeFi ecosystems across blockchains. The protocol is working to expand its yield offerings and make Bitcoin more accessible, including the option to stake wBTC and other Bitcoin derivatives.
In addition, pSTAKE Finance is focused on developing its token economics and launching a fully self-hosted Bitcoin yield solution that ensures user security and accessibility. pSTAKE Finance also has its own native governance and incentive token PSTAKE.
Swell Network
Main features
- Non-custodial staking: Swell allows users to stake WBTC directly from non-custodial wallets, ensuring full control of assets.
- Revenue generation: swBTC generates revenue through re-staking protocols such as Symbiotic, EigenLayer and Karak.
- Liquidity: swBTC can be used as collateral in lending protocols
Swell Network, traditionally an Ethereum liquidity staking platform, recently launched a Bitcoin liquidity staking token called swBTC. This ERC-20 token provides liquidity for users who want to stake Wrapped Bitcoin in protocols such as Symbiotic, EigenLayer or Karak without locking up their assets. With swBTC, users can earn native returns from the restaking platform while leveraging the token across the entire DeFi ecosystem.
UTXO Stack
Main features
- Backed by ABCDE, OKX Ventures, CMS Holdings and Matrixport
- Staying true to Bitcoin’s roots and adopting the UTXO model
- Integrated with RGB++ protocol
- Also integrated with Nervos Network, so not a Bitcoin-only solution
The UTXO Stack provides developers with a technical framework that allows them to easily release Bitcoin layer 2 solutions using the Unspent Transaction Output (UTXO) architecture. It's 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 Liquid Staking Protocol is backed by prominent cryptocurrency investors including ABCDE, OKX Ventures, CMS Holdings, and Matrixport.
UTXO Stack integrates the RGB++ protocol to enhance the security of the Bitcoin Layer 2 network through a combination of re-staking Bitcoin, CKB (the Nervos Network’s native cryptocurrency), and Bitcoin L1 assets issued through RGB++. UTXO Stack attempts to become the "OP Stack + EigenLayer" of the Bitcoin world.
UTXO Stack's use of RGB++ is its most unique attribute. Unlike many existing solutions that rely heavily on the Ethereum EVM and bridging mechanisms, UTXO Stack and RGB++ maintain close ties with the Bitcoin main chain and UTXO model. RGB++ allows assets to be issued and managed on Bitcoin, with transactions executed on the Nervos Network and recorded as commitments on Bitcoin. A major benefit of this approach is that it enables efficient “transaction folding” to reduce fees. Of course, integration with the Nervos Network will put off many Bitcoin purists.
Nomic
Main features
- Plans to cooperate with Babylon
- Owns an LST called stBTC (could be confused with Lorenzo’s product of the same name)
- Has its own native token NOM to protect its layer 1 network
- Bitcoin and NOM will offer double collateral
- Work within the Cosmos ecosystem
Nomic is a Layer 1 blockchain network executing 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 suite roadmap that involves using separate chains for different specific use cases.
The Nomic DAO Foundation plans to incorporate 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, leveraging both staking Bitcoin and its native token NOM.
By leveraging Babylon's technology, stBTC will enable Bitcoin holders in the Cosmos ecosystem to earn yields while maintaining liquidity for use in Inter-Blockchain Communication (IBC) compliant DeFi protocols. Nomic’s approach allows the exchange of real Bitcoins for nBTC tokens, which can be freely transferred between IBC-compatible chains. These nBTC tokens are backed by real Bitcoin from reserves controlled by NOM token holders, who are also validators of the Nomic chain. Through this system, users can stake nBTC to mint stBTC. Staking rewards will be distributed through IBC interchain account transactions.
stBTC is currently launched on the testnet, allowing users to explore its features before its official mainnet launch.
PumpBTC
Main features
- Built on Babylon
- Current version uses WBTC, BTCB and FBTC on alternative layer 1 networks
- Partnering with cryptocurrency custodians Cobo and Coincover
- Smart contract audit performed by BlockSec
- PumpBTC points for extra rewards
PumpBTC plans to provide a liquidity re-staking solution through Babylon. PumpBTC aims to simplify and increase profitability for Bitcoin holders, allowing users to stake their Bitcoin and receive liquidity tokens immediately, bypassing the usual waiting period. Much like other projects on this list, which aim to bridge the worlds of DeFi and Bitcoin, PumpBTC describes itself as an effective alternative to WBTC, providing a native solution for the DeFi ecosystem across multiple blockchains. income-generating Bitcoin.
Currently, PumpBTC allows users to deposit their Bitcoin for staking through various Bitcoin derivative tokens issued on alternative layer 1 networks such as Ethereum and Binance Smart Chain. Additionally, PumpBTC does not handle user funds directly, as this aspect of the protocol is handled by escrow partners Cobo and Coincover. While the PumpBTC smart contract has been audited by blockchain security firm BlockSec, this heavy reliance on multiple layers of third-party escrow may turn off many Bitcoin purists who prefer to adhere to the principles of decentralized and permissionless finance. . Nonetheless, PumpBTC claims that they will eventually add the ability to directly stake native Bitcoin into the protocol.
In addition to the benefits PumpBTC users can earn from their staked Bitcoins through Babylon integration, users can also earn additional rewards through PumpBTC Points. That being said, the exact future utility of these points is unclear at this time. In terms of total rewards, Bitcoin stakers can earn their base staking Annual Percentage Rate (APR), Babylon Points, PumpBTC Points, and FBTC Points on one platform, with more rewards expected to be added in the future.
Lombard
Main features
- Backed by renowned industry leaders including Franklin Templeton Investments and Polychain Capital
- Based on Babylon
- Currently focused on making LBTC the main way to use Bitcoin in DeFi
- In addition to Babylon staking rewards, also earn Lombardy Points
- Supported by a security alliance composed of DeFi industry leaders
- Currently in private beta
Lombard aims to establish a common standard for Bitcoin and is supported by ecosystem partners. The protocol’s primary focus is to allow yield-generating Bitcoin to move seamlessly across chains without disrupting liquidity, potentially bringing vast amounts of new untapped capital into DeFi.
Lombard’s core product, Liquid Bitcoin (LBTC), provides 1:1 support, yield-generating cross-chain liquid Bitcoin, allowing holders to retain access to their capital while actively participating in DeFi activities such as staking and trading . Currently in Phase 1 on the Ethereum mainnet, Lombard is undergoing private testing, and some users can stake Bitcoin and mint LBTC. In Phase 2, Lombard will open LBTC to the public, with deposit caps and waitlists in place to manage demand and reward early participants.
The governance and promotion of LBTC is also supported by the Security Alliance, which is tasked with highly integrating Bitcoin tokens into existing DeFi protocols and blockchains. Still, Lombard has yet to announce specific members of the security alliance.
Bitcoin holders can obtain a range of benefits through Lombard, including PoS staking, Lombard rewards and DeFi opportunities. Other DeFi protocols could also benefit from LBTC by building new yield primitives, and target blockchains could see a flood of new liquidity with billions of dollars in Bitcoin being integrated onto these DeFi-focused chains. in the application.
Lombard's mission is to position Bitcoin as not just a store of value, but a key player in DeFi that can be used to earn, 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 PoS networks through the stability supported by Bitcoin.
Chakra
Main features
- Offer Bitcoin re-staking
- Realize self-custody staking based on zero-knowledge proof
- Building ChakraBTC and ChakraETH
- Chakra chain acts as an intermediary software chain between Bitcoin and its layer 2 network
As a Bitcoin re-staking protocol, Chakra seeks to unlock Bitcoin’s full economic potential by leveraging advanced Zero-Knowledge Proof (ZKP) technology to secure new chains and applications. The core challenge that Chakra solves is how to allow Bitcoin holders to benefit from staking returns without compromising the custody security of the staked Bitcoins. This is achieved through Cobo's Babylon-powered self-hosting and MPC-powered hosting (multiparty computation).
Chakra offers a unique solution by enabling self-custodial staking, allowing Bitcoin holders to stake assets without moving them out of their wallets. Time-locked scripts are also a building block of the Lightning Network and are used to eliminate third-party risks sometimes associated with the staking process. Chakra also uses ZKP, specifically Scalable Transparent Knowledge Argument (STARK), to improve the security and scalability of the system.
In addition, Chakra supports a range of services maintained by stakers, including AI, DeFi and in-game applications. It facilitates the creation of new Bitcoin Layer 2 networks and the development of DeFi Bitcoin-backed derivatives, thereby expanding utility and earning opportunities for Bitcoin holders. Best of all, Chakra users will be able to re-stake via Bitcoin, using the same collateral to stake simultaneously on a variety of different networks.
Chakra describes itself as a modular settlement network for the Bitcoin DeFi ecosystem built around a variety of different layer 2 networks. It also interoperates across various layer 1 networks, with a focus on building a converged financial layer that can unify Bitcoin liquidity across the space. The Chakra chain effectively acts as an intermediary between the underlying Bitcoin protocol and any blockchain that wants to obtain secure Bitcoin liquidity.
Solv Protocol
Main features
- Investors include Binance Labs and Blockchain Capital
- UTXO-3525 supports cross-chain non-custodial Bitcoin exchange
- Issuing SolvBTC as a unified Bitcoin liquid asset
- Supports Bitcoin, Ethereum, BNB Chain, Botanix and many other blockchains
- Audited by five independent firms
- Compliance Bridge supports traditional financial participation
The Solv protocol aims to establish a decentralized Bitcoin reserve that can be deployed throughout the DeFi field, which they call "BTCFi". Through their SolvBTC token, they are focused on unifying Bitcoin liquidity into one asset that can be used for all staking and other DeFi applications.
A long list of high-profile investors are backing the Solv protocol, including Binance Labs, Blockchain Capital, CMS Holdings, and Bing Ventures. In addition, the protocol has undergone five independent security audits by Quantstamp, CertiK and others.
From a technical perspective, the three key aspects of Solv are the Liquidity Consensus Network (LCN), UTXO-3525, and the Compliance Bridge. The Liquidity Consensus Network manages decentralized Bitcoin reserves held in the Solv protocol through transparent, auditable records and cross-chain liquidity management. UTXO-3525 is a protocol for transferring assets from the base Bitcoin blockchain to an 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 protocols 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 for Bitcoins pledged through Babylon and SolvBTC.ENA for Bitcoins pledged through Ethena. Additionally, Solv plans to enable Bitcoin revenue opportunities through Ethereum, Binance Smart Chain, Botanix, and a number of other blockchains.
Acre
Main features
- Has a governance token called ACRE
- Built on tBTC decentralized Bitcoin bridge, not Babylon
- Bitcoin stakers receive stBTC LST
- Users can also earn Acre points
- Currently executed on Ethereum
- Planned to integrate with Mezo Bitcoin layer 2 network
As the liquidity layer of the Bitcoin 2-layer network, Acre provides Bitcoin deposit and Bitcoin withdrawal pledge services. When Bitcoin is deposited into Acre, it mints stBTC, an LST that is redeemable 1:1 for Bitcoin. Deposited Bitcoins are then invested in various yield-generating strategies on the Bitcoin Layer 2 network and DeFi platforms, with rewards accumulated into stBTC tokens. This includes using the underlying Bitcoin as a proof-of-stake asset to provide security for the Bitcoin Layer 2 network. The stBTC token contract is currently deployed on Ethereum. It does not reprice based on its accumulated earnings, meaning the value of stBTC should increase over time rather than the amount of stBTC held by the user.
Notably, 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. Bitcoin deposited into Acre via the underlying blockchain is converted to tBTC before staking. tBTC is supported by leading DeFi projects and plays a vital 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 who hold ACRE tokens.
The current state of the product
When looking at the various liquidity staking platforms discussed, there are common themes and differences that set each platform apart.
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 flows, while Lombard supports staking across various networks, increasing the opportunities for users to earn income. Likewise, Swell introduced a re-staking feature to enable Wrapped Bitcoin holders to take advantage of liquidity.
Revenue optimization and reward mechanism
All major platforms focus on generating yields, but Lorenzo Protocol stands out with its leveraged staking options. It enables users to maximize their earning potential by borrowing more BTC for further staking using staked Bitcoin as collateral. Lombard and Bedrock offer higher yields through partnerships, while PumpBTC combines instant staking transparency and point aggregation to unlock additional rewards.
A bright future for BTCFi
As the Bitcoin liquidity staking ecosystem rapidly evolves, various protocols present exciting opportunities and unique features.
These innovations enable Bitcoin holders to earn income while maintaining liquidity, opening the door to diverse DeFi applications in the Bitcoin ecosystem. The diversity of Bitcoin liquid staking protocol not only enhances user choice, but also stimulates further innovation in the Bitcoin DeFi field.
Going forward, the growth of Bitcoin liquid staking protocol will redefine how Bitcoin holders interact with the broader blockchain ecosystem. As these platforms mature and expand their suite, they are expected to unlock greater functionality and accessibility, making Bitcoin a more versatile and productive asset.
Since this space is still in its very early stages and many protocols have not yet launched, it is crucial to track the latest developments in this new area of Bitcoin extension suite. Having said that, the number of new projects in this space shows that the future of earning income through Bitcoin staking is bright.
