BTC Staking track map review

Forwarded the original title ‘BTC Staking是承载L2的重要叙事 | 赛道Map梳理’

1. The narrative of BTC asset launch has come to an end

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 generation will become mainstream in the future.

Represented by Babylon, it provides economical security for other PoS chains by staking BTC, and obtains income through staking. This opens up the BTC staking track and will also completely change the gameplay of the BTC ecosystem. From playing with BTC principal to Play with BTC interest.

BTC staking is driven by two important narratives. The first one is similar to ETH’s DeFi, and the foremost important is to increase the return rate of the overall asset.

According to data from DefiLlama, the current BTC interest-earning market size exceeds US$10 billion, with a yield rate between 0.01% and 1.25%. Generally, it needs to be entrusted to a third-party CeFi institution. The staking rewards of PoS blockchains often range between 5% and 20%. The income from staking BTC to provide stake for other PoS chains will not be too low. BTC Staking can obtain 50 times the interest-earning income of traditional BTC, which will be a huge growth point.

The second is the hot narrative of BTC L2, which fills the gap between L2 and BTC. Nearly 80 BTC L2s have appeared on the current market, and if the BTC mainnet block is completely filled with DA, it can only carry up to twenty L2s. Many L2s have settled for the next best thing and changed the frequency of uploading BTC data to once every few months. How can these BTC Layer 2s, which use centralized custodial bridges and whose security isn’t guaranteed by BTC and are built using EVM, convince the community that they are relevant to the BTC ecosystem? There’s a huge narrative gap here.

Obviously, being able to act as the validator network for Babylon or BounceBit gives a great deal of legitimacy to BTC Layer 2s. Moreover, by earning interest through Proof of Stake (PoS) as early as possible, they are more likely to yield direct benefits for their tokens and ecosystems.

However, unlike the restaking project Eigenlayer on Ethereum, most BTC holders are passive. 67% of BTC holders haven’t moved their holdings in over a year, making it somewhat challenging to convince them to participate in staking.

In addition, BTC staking, unlike ETH staking, does not have native token-based interest. The interest is often the tokens of the Layer 2 itself, which carries some risk. Of course, some Layer 2s that use BTC as a gas fee have tried to distribute the BTC collected as transaction fees to staking users, but clearly, this is not enough to sustain them.

To put it bluntly, the purpose of BTC Layer 2 is to attract (or lure) BTC deposits. BTC Staking is a more efficient way.

In addition to staking, we also need to consider the performance of BTC. It is not a pseudo-demand, but a necessity, to build Layer 3 on top of mature Layer 2 stakes. Projects like Nubit that can build Layer 2 into a DA nest, or those using CBK’s UTXO Stack framework, can have greater advantages in technical selection.

2. @babylon_chain

Babylon, through cryptographic methods, provides PoS security assurance for other blockchains by native staking on the first layer of BTC.

Babylon’s staking is cross-chain staking, and the staked Bitcoin is retained in the script on the Bitcoin network. Stakers can designate their chosen validators to earn validator rewards on the corresponding PoS chain.

On the technical level, Babylon’s staking process operates entirely through a cryptographic method of “extractable one-time signatures (EOTS)”, not relying on any third-party bridges or custodians. Babylon has also designed a complete BTC Staking function that includes penalties. If the staker (who is also the validator of this PoS chain) remains honest and only signs one valid block each time, they will receive the validator rewards of the PoS chain. If they attempt to misbehave by signing two blocks at the same block height, their EOTS private key will be deduced, and anyone can use this private key to transfer the staked BTC on the BTC chain, thus implementing a penalty.

Babylon is currently undergoing testnet staking and is about to launch the next round of SBTC tests in May. It will open for pre-deposits in the second half of the year, and the token may be issued at the end of the year. Babylon has also revealed in Space that it will issue liquidity assets for staked BTC (similar to stETH), and subsequent restaking and lrt, lst projects are already available with @Chakrachain, @LorenzoProtocol, @yalaorg, and @SataBTC.

三、@ChakraChain

Chakra is a BTC staking and restaking protocol. Users’ deposited BTC can be put into BTC Staking protocols like Babylon to earn multiple returns. Meanwhile, Chakra provides a verification service maintained by Staker, providing security assurance for BTC L2.

Chakra uses the MuSig2 protocol to aggregate a series of user signatures, generating a UTXO with a time lock that can “stake” Bitcoin within a certain period, completing the staking action. Bitcoin holders do not need to transfer BTC to any third-party custodial address, but instead achieve “self-custody Layer 1” through a derivative address.

The unlocking conditions for the staked BTC UTXO are only two: one is that the Chakra network and the user jointly sign to retrieve it, which may be the user initiating an early unlock request in the Chakra network, providing flexibility; the second is that when the initially set lock-in period is reached, the user will automatically gain control of these BTCs, and even if the Chakra network stops running, the user can still withdraw BTC on time.

Different from Babylon, which also uses self-custody BTC staking, the Chakra network does not have the ability to forfeit user-staked BTC, but secures consensus by reducing consensus rewards, which further avoids some potential error forfeitures threatening users’ BTC assets.

Chakra has also introduced ZK’s capabilities into the BTC staking ecosystem, obtaining investments from Starkware, ABCDE, Bixin, and Coin Summer. It is currently running a testnet, and users can connect their wallets to chakrachain.io/devnet to receive proof of early participation.

4. @build_on_bob

BOB is a BTC EVM sidechain architecture implemented using the OP Superchain SDK. It uses wrapped BTC such as wBTC and tBTC on ETH as gas fees and will introduce BTC’s security through a new POW merged mining protocol in the future.

Currently, the BOB testnet has been running for several months and has developed a certain ecosystem. The mainnet will go live on May 1st. It’s currently conducting the first phase of the deposit activity, where accumulated Spice points correspond to future $BOB tokens, which will be directly TGE after the mainnet launch.

To Participate in BOB’s pre-staking requires operations on the ETH mainnet. If it’s BTC, it needs to be cross-chained to $tBTC, $wBTC, with a yield multiplier of 1.5 times. It also accepts DAI, eDLLR, rETH, USDC, USDT, wstETH, STONE, with a staking reward multiplier of 1.3 times, and accepts ALEX, ETH, eSOV staking, with a reward multiplier of 1 time.

BOB has strong resources. It has cooperated with $MARA, the largest listed mining company in the US stock market, to launch BTCL2, and has just announced a US$10 million investment from Coinbase. It can be regarded as a benchmark project for Binance and Bouncebit. Currently, BOB’s first deposit TVI is currently around US$250 million and has great potential.

Deposit link: fusion.gobob.xyz/?refCode=cdmzz5

五、@BotanixLabs

BotanixLabs has constructed 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 called Spiderchain.

By staking BTC, users can become validator nodes to participate in PoS and the multi-signature network Spiderchain. Botanix uses Bitcoin block hash values as the source, randomly selecting nodes to participate in PoS block production. After a period of operation, the block header will be engraved into the BTC block for final confirmation.

The settlement layer of Botanix’s L2 is BTC, its gas is also BTC bridged from other chains, and its consensus also uses the security of BTC as a guarantee.

The assets on L2 in BTC are all protected by the multi-signature network Spiderchain. The nodes also randomly form multi-signature groups to control the BTC in the multi-signature address. The cost of nodes’ misbehavior is high because their staked BTC can be forfeited.

Currently, Botanix’s test net has been running for half a year. Users can participate in the test and receive a series of NFT certificates at botanixlabs.xyz/en/testnet. BotanixLabs has been building L2 on BTC since 2022 and has certain technical strength. Its testnet is a good opportunity to participate.

6. @bounce_bit

BounceBit is a BTC-based income and restaking infrastructure. BounceBit aims to merge CeFi and DeFi businesses within BTC income, and uses BTC staking to assure blockchain security.

BounceBit itself is also an BTC EVM L2, and its PoS staking allows not only the staking of its native BB token but also BTC assets.

Furthermore, the BTC assets absorbed by BounceBit (including mainnet BTC and BNBChain’s BTCB, WBTC) are held in a centralized custodial service supported by Mainnet Digital and Ceffu, making it the only institutional custodial service used by Binance. BounceBit attempts to eliminate BTC users’ security concerns through this endorsement.

The BTC assets deposited by users on BounceBit become bounceBTC, and users can choose to stake these BTCs to other validator networks, such as EVM chains, decentralized bridges, and oracles, to earn verification rewards from these networks.

BounceBit brings triple returns to users through a series of businesses. Mainnet BTC assets are deposited into Binance and other cefi to secure stable returns. Users can also stake on the BounceBit chain to earn bb tokens, or restake to other validator networks to earn rewards, or use it for AMM, lending, and other DeFi businesses. BounceBit is supported by Binance, and will provide 8% of the tokens to the BNB stakers of Binance Megadrop.

7. @MezoNetwork

Mezo is a BTC L2 built on tBTC, utilizing the architecture of Cosmos EVM. It achieves asset transfer from BTC to Mzeo L2 through a multi-signature cross-chain bridge provided by tBTC.

Mezo is distinctive for introducing what is known as HODL Proof, a Ponzi economics concept similar to BTC staking’s ve33. Users can lock their BTC on Mezo to participate in consensus. The longer the lock-up period, the greater the weight of staking validation, leading to higher rewards.

Mezo’s PoS is divided into two parts, the BTC part and the native token MEZO part. Both can earn veMEZO as rewards, with incentives divided into different incentive pools. The total incentive is split so that 1/3 goes to BTC stakers, and 2/3 goes to MEZO stakers.

On April 9, the Bitcoin second-layer network, Mezo, completed a $21 million Series A financing round. It was led by Pantera Capital, with participation from Multicoin, Hack VC, Draper Associates, and others.

Currently, Mezo has initiated its early deposit activities. It now accepts deposits of native BTC, wBTC, and tBTC, with plans to launch the Mezo mainnet in the second half of 2024.

8. @LorenzoProtocol

Lorenzo Protocol, built on Babylon, is a liquidity staking protocol for Bitcoin, offering fast deployment services for L2-as-a-service. Lorenzo aims to lower the entry barrier for BTC staking projects like Babylon, reduce staking forfeiture risks for stakeholders, and free up liquidity of staked BTC assets.

Babylon is a fundamental BTC staking protocol, similar to native ETH staking, and may require a certain minimum amount of BTC for staking.

However, for individual users, staking revenue is not stable, and there is a risk of forfeiture. Therefore, it is necessary to participate in the BTC Staking liquidity staking protocol as a whole on a risk-reward basis through the BTC staking pool. This is what Lorenzo Protocol is set to do, similar to Lido.

Stakers can choose to participate in the staking of the PoS chain and deposit their Bitcoin into the corresponding Lorenzo custodial vault, which is a Bitcoin multi-signature address.

Stakers can obtain an equal amount of stBTC on Lorenzo’s own chain as a liquidity proof for participating in Babylon’s Bitcoin staking, and use this to claim staking rewards.

The Lorenzo chain itself is protected by shared Bitcoin security from Babylon, it’s an EVM-compatible Bitcoin L2. It will also use a modular approach to assist with the deployment of more BTC L2s in the future, with the Lorenzo chain serving as a direct interoperability chain for these L2 chains.

Disclaimer：

1. This article is reprinted from [SevenUp DAO]. Forwarded the original title ‘BTC Staking是承载L2的重要叙事 | 赛道Map梳理’ All copyrights belong to the original author [blockpunk]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.