Unlocking the Future of Bitcoin Staking: Understand the BTCFI Ecosystem in One Article

Author: Kevin, Caiya researcher from BlockBooster

Bitcoin's potential for yield generation has been limited due to its Proof of Work (PoW) consensus. Unlike Proof of Stake (PoS), Bitcoin lacks a native staking mechanism. However, with the rise of BTCFi, new methods are gradually emerging that allow Bitcoin to generate yield without compromising security. The BTCFi ecosystem can be broadly divided into two parts: the BTC layer with restaking, and asset protocols such as ARC20 and BRC20. This article will explore how emerging players in the BTCFi space are reshaping the landscape of Bitcoin restaking and compare their key advantages.

Current Landscape of Bitcoin Restaking

Bitcoin restaking is not a new topic in this cycle, with well-known projects such as BounceBit, Coredao, Stakelayer, and the recently popular Babylon and Symbiotic.

First, let's analyze Babylon's solution. Babylon's Bitcoin staking scheme includes several innovations aimed at enhancing security and user experience, making it stand out among many protocols:

• Remote Staking: Babylon utilizes Bitcoin's UTXO model and scripting system for staking, slashing, and reward distribution. A significant advantage is that users staking Bitcoin do not face slashing penalty risks; only node operators are affected. This means users' Bitcoin is not at risk of loss, only that they cannot unlock their staked funds early, ensuring higher security.
• Timestamp Server: Babylon's timestamp server records events from PoS chains onto the Bitcoin mainnet, providing tamper-proof timestamp records. Although the Bitcoin mainnet ensures that these records cannot be altered once on-chain, the accuracy of the timestamps still relies on Babylon's PoS network.
• Three-Layer Architecture: Babylon's architecture is divided into three layers—Bitcoin as the base layer, Babylon as the middle layer, and the PoS chain as the top layer. Babylon records checkpoints from the PoS chain onto the Bitcoin blockchain, ensuring data immutability. By using Cosmos as the middle layer, it enhances scalability and flexibility, attracting node operators and enabling native Bitcoin staking to support Babylon's PoS network.

While Babylon is a leader in native Bitcoin staking, it is not the only protocol exploring restaking. Let's take a look at the Bitcoin staking solutions of two other star projects:

• Symbiotic: Co-founded by Lido and Paradigm, Symbiotic is considered a direct competitor to EigenLayer. Symbiotic recently announced support for Bitcoin restaking but currently only accepts WBTC staking. Unlike Babylon's native Bitcoin staking, Symbiotic requires users to transfer Bitcoin to a third-party custodial address. So far, Symbiotic has staked 1,630 WBTC and incentivizes user participation through point rewards.
• CoreDAO: CoreDAO offers two staking options: one is native staking, allowing Bitcoin holders to delegate their Bitcoin to Core validators without transferring funds; the other is custodial staking, where users send Bitcoin to a locked address and mint coreBTC on the CORE chain. Currently, CoreDAO only supports the custodial staking option.

All three aim to bring more application scenarios to the Bitcoin ecosystem, stimulating cross-chain communication or data sharing between Bitcoin and other chains. The restaking platforms themselves share the security of the underlying network through a modular approach and empower AVS, providing infrastructure for widespread applications and significantly improving blockchain efficiency and performance.

Advantages:

• Babylon and CoreDAO shorten the staking process of PoS chains through Bitcoin's timestamp mechanism;
• Symbiotic has the support of Lido and Paradigm, gaining an advantage in protocol collaboration and ecosystem promotion;
• Babylon is the first to achieve native staking, realizing trustlessness in Bitcoin staking.

Disadvantages:

• CoreDAO and Symbiotic still rely on third-party custody to address trust assumptions;
• Babylon's PoW+PoS architecture has shortcomings in security logic, passively relying on the Bitcoin network for accounting functions and not actively leveraging the security of the Bitcoin network.

Unlike Ethereum's restaking platforms, Bitcoin's restaking platforms do not directly transmit the security of the Bitcoin network to their respective PoS networks, which is also a key direction for future development.

Bitcoin Restaking Ecosystem

Several protocols have collaborated with the Bitcoin restaking ecosystem, aiming to enhance the liquidity and utility of staked Bitcoin assets:

• Bedrock: As the leading project in Babylon's first round of pre-staking, holding about 30% of the share, Bedrock supports staking WBTC to mint uniBTC. After the launch of the Babylon mainnet, users will be able to earn rewards from both uniBTC and Babylon staking, with the potential to receive airdrops through Bedrock's Diamonds program.
• Lombard: Lombard allows users to stake Bitcoin through Babylon, with Lombard managing the restaking process. When users stake Bitcoin, Lombard mints an equivalent amount of LBTC on Ethereum. Users can use LBTC to participate in DeFi activities, enjoying the flexibility of cross-chain yields.
• Lorenzo: Lorenzo offers liquid staking and restaking through a principal-yield separation model, allowing users to stake Bitcoin or BTCB to receive stBTC (liquidity principal token) and YAT (yield token). This dual-token system enables users to earn Babylon's native staking rewards while accumulating Lorenzo points.
• Pell Network: Pell is the first secure network built on Bitcoin restaking and operates on Babylon's AVS network. Pell's TVL has exceeded $200 million within three weeks, with over 410,000 unique addresses. Pell offers four types of restaking options, covering everything from native Bitcoin staking to staking LP tokens containing liquid BTC derivatives, and its AVS architecture allows it to capture substantial revenue from middleware, oracles, modular chains, and more.
• PumpBTC: Allows users to stake WBTC or BTCB and receive pumpBTC tokens on a 1:1 basis. The uniqueness of PumpBTC lies in the fact that the restaking process is handled by third-party custodians (such as Cobo and Coincover). Users can enjoy yields without directly interacting with the protocol, simplifying the staking process.
• Solv Protocol: Solv has developed a liquidity layer for Bitcoin assets across multiple chains, supporting cross-chain bridging of WBTC on Arbitrum, BTCB on BNB Chain, and BTC.b on Avalanche. Users can earn XP points by holding solvBTC, participating in lending protocols, or adding liquidity to liquidity pools. Additionally, although the Babylon mainnet has not yet launched, users can bridge to Babylon through Solv's vault to earn more points.
• Stakestone: Expected to adopt a model similar to ETH-STONE, users will stake native Bitcoin to Babylon and mint yield-bearing STONEBTC for cross-chain liquidity. Users can earn points from various ecosystems, such as double Scroll points.

Conclusion

Transforming Bitcoin into an asset that can generate yield is of great significance, and Bitcoin restaking is an effective complement to the definition of Bitcoin as "digital gold," greatly enhancing its liquidity. Unlike the Ethereum ecosystem, BTCFi protocols, such as Babylon, Symbiotic, and Coredao, do not rely on pre-existing infrastructure, which presents both challenges and opportunities. Platforms like Solv, Lombard, and Lorenzo are gradually developing, focusing on multiple rewards, security flexibility, and dual incentive systems. BTCFi is still in its early stages, with rapid technological and ecosystem development, and we will continue to monitor the dynamics in this field.