Babylon's Innovative Bitcoin Staking: Native Asset Trustless Staking Leading a New Track in the BTC Ecosystem

Babylon is an innovative Bitcoin staking solution that enables trustless staking of Bitcoin native assets through cryptography technology. This solution allows Bitcoin to remain secure on the mainnet while providing PoS security guarantees for other blockchains and generating returns.

The staking process of Babylon is entirely based on the extractable one-time signature (EOTS) cryptographic mechanism, operating without relying on any third-party bridging or custody services. This highly secure design has gained widespread recognition in the Bitcoin community.

This scheme provides Bitcoin holders with a secure way to obtain staking rewards, creating a new track for Bitcoin staking that is expected to fundamentally change the operational mechanisms of the Bitcoin ecosystem. In addition, the introduction of Bitcoin staking can also help address issues such as inflation and startup difficulties faced by small and medium-sized PoS chains.

The Bitcoin liquidity staking plan is similar to a demand deposit, allowing users to deposit and withdraw at any time while earning interest. At the same time, the liquidity staking tokens can also generate additional income in other DeFi projects. In contrast, Babylon staking is more like a fixed deposit, offering higher yields but with funds that cannot be withdrawn at any time.

This solution can also attract more non-mainnet Bitcoin users to participate, such as wBTC holders on Ethereum. Essentially, liquid staking can be seen as the project team borrowing users' Bitcoins to stake in Babylon, using the staking rewards to pay users interest, while the users' bond ( liquid staking token ) can also be traded.

Currently, most Babylon liquid staking tokens are built on Ethereum, with plans to support multi-chain in the future. Except for Lombard, which allows users to stake directly to Babylon, other projects adopt a custodial model, where the project parties stake on behalf of users to Babylon, and liquidity is provided by third-party institutions.

pSTAKE adopts an institutional custodial liquidity model. Users stake funds to pSTAKE's storage address, with liquidity support provided by custodians such as Cobo, and then the project parties stake Bitcoin to Babylon. yBTC is its official liquid staking token, which has not yet been issued and is expected to allow users to earn additional returns in other DeFi projects. yBTC will initially be issued on Ethereum and will later expand to other L2 networks.

Lorenzo implemented a principal and interest separation service similar to Pendle in the Bitcoin liquidity scheme. Users send Bitcoin to Lorenzo's multi-signature wallet, which is held in custody by a group of trusted Bitcoin institutions and traditional financial giants (, represented by the staking agent ), and receive stBTC as a staking certificate. Lorenzo then stakes the Bitcoin with Babylon.

Lorenzo issues three types of tokens:

1. Liquidity Principal Token ( LPT ): represents redeemable Bitcoin principal, stBTC is Lorenzo's official LPT.
2. Yield Accumulation Token ( YAT ): Represents the right to obtain yields from the staking project at the end of the staking period.
3. Stake Proof Token ( SPT ): Used to determine which staking agent will redeem Bitcoin.

Both LPT and YAT can be traded, and holders can use them to withdraw staked Bitcoin and claim rewards respectively. LPT such as stBTC can be considered another form of wrapped Bitcoin, with Lorenzo's goal to ultimately replace wBTC. The value of YAT comes from the accrued yield and speculation on future yields, making it highly volatile.

Lombard adopts a more decentralized approach, where user funds are directly staked to Babylon, rather than relying on third parties to provide liquidity. Its overall architecture consists of users, Bitcoin nodes, back-end, and a decentralized state machine managed by Consortium( for the staking process.

The staking process of Lombard is managed by a decentralized Consortium. Users send native Bitcoin to the Consortium's address, and the backend triggers the deposit notarization process once the deposit is detected. The Consortium verifies the deposit and then stakes the Bitcoin to Babylon, minting an equivalent amount of LBTC.

LBTC is the liquidity staking token of Lombard, and holders can earn native rewards through Babylon staking. LBTC is redeemable 1:1 with Bitcoin, supports cross-chain functionality, and can be used as collateral for DeFi protocols. LBTC will initially be issued on Ethereum and will later expand to multiple chains.

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Solv integrates staking rewards and re-staking rewards from Bitcoin Layer 2 ) into Babylon (, and tokenizes DeFi yields from Ethereum Layer 2 into SolvBTC. SolvBTC can be seamlessly integrated with other protocols, bringing Bitcoin liquidity into various application protocols. Solv currently supports Ethereum, BNB, ARB, and Merlin chains.

Solv adopts a decentralized asset management architecture, including built-in security guardians, price oracles, and token modules based on liquidity strategies, establishing trustless process standards through smart contracts. Solv also adopts a custodial model, with off-chain funds held by reputable custodians.

solvBTC.BBN is the official liquidity staking token of Solv, which will be integrated with various DeFi protocols. Its main uses include:

1. Provide instant liquidity and high yield opportunities for holders in DEX without KYC.
2. Earn additional returns as collateral in the lending agreement while allowing borrowers to obtain leveraged positions.
3. Enable users to trade future earnings of BBN in the yield trading protocol, manage earnings volatility, and optimize returns.

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Bedrock was initially developed for the Eigenlayer ecosystem and later became the largest staking entry on IOTX, achieving a total TVL of nearly $200 million across the ETH and IOTX ecosystems. Recently, they were commissioned by Babylon to develop the BTC liquid staking protocol UniBTC, which allows Ethereum users to stake wBTC for Babylon. uniBTC is currently issued on Ethereum.

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Master Protocol is a yield aggregation platform that integrates BTC ecosystem projects such as Bouncebit, Babylon, and BitLayer, allowing users to stake or trade through the platform. Its two main products are Master Yield Market and LST Protocol on Botanix Spiderchain.

The basic function of Master Yield Market is to aggregate Bitcoin ecological assets, package them as MSY, and then split them into principal ) and interest MYT ( for users to trade. Its principle is similar to the Pendle protocol: • MPT)Master Principal Token(: Represents the principal, purchasing MPT can lock in the profits of the underlying assets in advance, equivalent to fixed-income products. • MYT)Master Yield Token(: Represents interest, low unit price but can improve capital utilization rate, equivalent to leveraged speculation on expected returns.

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Chakra is a ZK-driven shared modular Bitcoin settlement layer that provides unified settlement services for all layer two networks, building an aggregated liquidity and interoperability network, releasing Bitcoin liquidity into the entire chain ecosystem. The funds on the Bitcoin network for Chakra are hosted by the MPC solution provided by Cobo, which is then staked to Babylon to earn staking rewards.

tlBTC is the staking certificate of Chakra, corresponding 1:1 with the amount of BTC staked on the Bitcoin network. tlBTC has three types of uses:

1. As a staking certificate, holders also enjoy the staking rewards of the underlying Babylon.
2. As a liquidity asset, it can be invested in the DeFi ecosystem to generate additional returns.
3. As a native asset for full-chain settlement, achieving high efficiency, low latency, and low slippage settlement.

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Babylon's BTC staking is about to launch, which will bring significant changes to the BTC ecosystem. Firstly, it will greatly increase the overall asset yield. Currently, the market size for BTC interest exceeds $10 billion, with yields ranging from 0.01% to 1.25%. In contrast, staking rewards on PoS blockchains often range from 5% to 20%, and staking BTC for other PoS chains could yield returns that are dozens of times greater than traditional BTC interest.

However, BTC staking led by Babylon is different from ETH staking, as the BTC chain itself does not have native yields and is more similar to the restaking business of eigenlayer. The related ecosystem will also be similar to the LRT protocol under eigenlayer. Therefore, the monopoly pattern of giants that appears in ETH staking is less likely to occur in BTC staking, and the motivation for exchanges to participate is also weaker. This provides development opportunities for early projects in the BTC staking field, and investors may also gain high returns from rapid growth.

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