Note: This article comes from @blockpunk2077 Twitter, and Mars Finance compiled it as follows:
BTC Staking may be an important narrative in the second half of the year and an important opportunity to open up the BTC ecosystem.
I have made a brief introduction, please feel free to forward and like it.
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 mainstream.
Babylon, for example, provides economical security for other Pos chains by staking BTC and earning income through staking. This opens up the track for BTC staking and will completely change the way the BTC ecosystem is played, from playing with BTC principal to playing with BTC interest.
BTC staking is driven by two important narratives. The first is just like ETH's DeFi, which is to increase the yield of the overall assets.
According to DefiLlama data, the current market size of BTC interest-bearing exceeds 10 billion US dollars, with a yield 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. BTC Staking can obtain 50 times the income of traditional BTC interest-bearing, which will be a huge growth point.
The second point is that BTC L2 is hot, filling 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 that use centralized custody bridges, whose security is not guaranteed by BTC, and built with 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 downgraded to BTC L2s brings huge legitimacy. At the same time, being able to earn interest through PoS and get the overflow of Staking BTC as early as possible will obviously bring direct benefits to the token and the ecosystem.
Of course, the market situation faced by Eigenlayer, the ETH restaking project, 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 in 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 not enough to support it.
To put it bluntly, the purpose of BTC L2 is to attract BTC deposits, and BTC Staking is a more efficient way.
In addition to staking, we should also consider 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 DA nested or CBK's UTXO Stack framework can gain greater advantages in technology selection.
Babylon provides POS security guarantees for other blockchains through native staking on the first layer of BTC in a cryptographic way.
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 validator income on the corresponding POS chain.
In terms of technical implementation, the Babylon staking process is completely run in the cryptographic way of "extractable one-time signature EOTS", without relying on any third-party bridges and custodians. Babylon has also designed a complete BTC Staking function that includes confiscations. If the pledger (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, 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 the space that it will also issue liquid assets (similar to stETH) that pledge BTC. Subsequent restaking and lrt and lst projects are currently available. @ChakraChain @LorenzoProtocol @yalaorg @SataBTC
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 achieve self-custody at the L1 layer through a derived address.
There are only two conditions for unlocking the pledged BTC UTXO: one is that the Chakra network and the user jointly sign before retrieving it. This may be because the user has initiated an early unlocking request in the Chakra network, which provides flexibility. The second is that when the initially set lock-up period is reached, the user will automatically gain control of these BTCs. 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 users' staked BTC. Instead, it ensures consensus by cutting consensus rewards, which further avoids possible erroneous confiscations that threaten users' BTC assets.
Chakra has also introduced ZK capabilities into the BTC staking ecosystem and has received investments from Starkware, ABCDE , Bixin, and Coin Summer. Currently, the testnet is in progress, and you can go to http://chakrachain.io/devnet to connect to your wallet to receive early participant certificates.
BOB is a BTC EVM sidechain architecture implemented using the OP Superchain SDK. It uses packaged BTC on ETH such as wBTC and tBTC as gas fees. In the future, it will also introduce BTC security through a new POW merged mining protocol.
The BOB testnet has been running for several months and has already established a certain ecosystem. The mainnet will be launched on May 1st. The first phase of deposit activities is currently underway. The Spice points accumulated through deposits correspond to future $BOB tokens and will be directly TGE after the mainnet is launched.
To participate in the pre-staking of BOB, you need to operate on the ETH mainnet. If it is BTC, you need to cross the chain to $tBTC, $wBTC, and the profit multiplier is 1.5 times. It also accepts DAI, eDLLR, rETH, USDC, USDT, wstETH, STONE, and the staking rewards multiplier is 1.3 times. It also accepts ALEX, ETH, and eSOV staking, and the reward multiplier is 1 times.
BOB has strong resources. It has launched BTC L2 in cooperation with $MARA , the largest listed mining company in the U.S. stock market, and has just announced a $10 million investment from Coinbase. It can be seen as a project benchmarked against Binance and bouncebit. Currently, the TVL of BOB's first phase of deposits is around $250 million, which has great potential.
Botanix Labs 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 the 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 realized block header will be engraved into the BTC block for final confirmation.
The settlement layer of Botanix L2 is BTC, its gas is also BTC from the collapsed chain, and its consensus also uses the security of BTC as a guarantee.
All L2 assets on BTC are protected by the multi-signature network Spiderchain, and nodes also randomly form multi-signature groups to control the BTC in the multi-signature address. The cost of nodes committing evil is high because their staked BTC can be confiscated.
Botanix's testnet has been running for half a year, https://botanixlabs.xyz/en/testnet , users can participate in the test and receive a series of NFT certificates. Botanix Labs has been building L2 on BTC since 2022 and has certain technical strength. Its testnet is a good opportunity to participate.
BounceBit is a BTC-based interest-earning and restaking infrastructure. BounceBit attempts to integrate CeFi and DeFi businesses in BTC interest-earning and use BTC pledge to guarantee the security of the blockchain.
BounceBit itself is also a BTC EVM L2. In addition to staking its native token BB, L2's PoS staking can also stake BTC assets.
At the same time, all BTC assets absorbed by BounceBit (including mainnet BTC and BTCB and WBTC on BNBChain) are 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 are converted into 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 held 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 DeFi businesses such as AMM and lending. BounceBit is supported by Binance and will provide 8% of the tokens to BNB stakers of Binance Megadrop.
Mezo is a BTC L2 built on tBTC, using the Cosmos EVM architecture to realize 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 HODL Proof, which is similar to BTC staking. Users can lock BTC on Mezo to participate in the consensus. The longer the lock-up period, 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. 1/3 of the total incentives are obtained by BTC stakers and 2/3 by MEZO stakers.
On April 9, Bitcoin's second-layer network Mezo completed a $21 million Series A financing round, led by Pantera Capital, with participation from Multicoin, Hack VC, Draper Associates and others.
Mezo has already 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.
The Bitcoin liquid staking protocol built on Babylon provides 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 penalties for pledgers, and release the liquidity of pledged BTC assets.
Babylon is a relatively low-level BTC staking protocol, which is similar to ETH's native staking and may have certain requirements for the minimum amount 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 BTC Staking liquid staking protocol 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 staked PoS chain and deposit their Bitcoin into the corresponding Lorenzo delegation vault, which is a Bitcoin multi-signature address.
Stakers can obtain an equal amount of stBTC on Lorenzo's own chain as liquidity proof of participating in Babylon's staking of Bitcoin, and use it to receive staking income.
The Lorenzo chain itself is protected by Babylon Bitcoin shared security, an EVM-compatible Bitcoin L2. In the future, it will also use a modular approach to help deploy more BTC L2s. The Lorenzo chain serves as a direct interoperability chain for these L2 chains.
