CoinDesk reports:
With Bitcoin’s market value continually hitting new highs, many Bitcoin holders and institutions are shifting focus towards enhancing Bitcoin’s financial properties: how to maximize returns on idle BTC and boost passive income.
On July 2nd, OKX Ventures announced an investment in Lombard to drive innovation in the Bitcoin rehypothecation ecosystem. These initiatives not only bring new capital opportunities for Bitcoin holders but also propel growth in the DeFi ecosystem.
Next, we will delve into how Lombard aims to achieve this goal.
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01
Funding Support and Ecosystem Development
Lombard, emerging in the Bitcoin rehypothecation ecosystem, is rapidly gaining market attention.
Built upon Babylon, Lombard facilitates cross-chain liquidity pledging of Bitcoin. The Babylon protocol is integral to Lombard’s success, enabling Bitcoin assets to be pledged in a trustless and self-custodial manner, ensuring economic security for Proof of Stake (PoS) systems. Its flagship product, LBTC, seamlessly integrates Bitcoin assets into Ethereum and Layer 2 chain DeFi protocols. LBTC, as collateral in decentralized finance, is poised to unlock over $1.3 trillion of Bitcoin for lending and trading.
Recently, Lombard secured a $16 million seed round led by Polychain Capital, with participation from BabylonChain, Inc., dao5, Franklin Templeton, Foresight Ventures, Mirana Ventures, Mantle EcoFund, and Nomad Capital.
This funding will further develop the Bitcoin rehypothecation ecosystem, particularly advancing Babylon’s pledging protocol. Through Babylon, pledged Bitcoin assets convert into LBTC, facilitating seamless integration into Ethereum mainnet and future prominent Layer 2 chain DeFi protocols.
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02
The Liquidity Revolution of Bitcoin
LBTC, Lombard’s flagship product, is a yield-bearing, cross-chain, highly liquid Bitcoin token. It is backed 1:1 by BTC and achieves cross-chain liquidity and yield through Babylon’s pledging protocol. This allows Bitcoin holders not only to continue holding and storing their Bitcoin but also to earn yields through pledging and utilize it in various DeFi protocols.
Users first pledge Bitcoin into Babylon’s pledging protocol, a process secured by Babylon’s decentralized validation and secure key management system.
Subsequently, users can mint an equivalent amount of LBTC via the Lombard platform. These LBTC tokens can seamlessly move cross-chain and be utilized in various DeFi protocols on Ethereum and future Layer 2 chains for lending, trading, and pledging.
The introduction of LBTC addresses Bitcoin’s lack of native yield and cross-chain composability in DeFi. By unlocking Bitcoin liquidity and capital potential, LBTC enhances Bitcoin’s utility and drives the development of the entire DeFi ecosystem.
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03
Multilayer Components and Security Mechanisms
Lombard’s technical architecture comprises multilayer components and security mechanisms, ensuring the system’s security and efficiency.
Firstly, CubeSigner:
CubeSigner, developed by Cubist, is a hardware-backed non-custodial key management platform. It offers low-latency hardware support for key generation, signing, and specific applications like validator staking or unstaking. CubeSigner utilizes AWS’s HSM encapsulated Nitro enclaves to ensure key security.
Key features of CubeSigner include:
(1) Theft-proof key protection: Keys are stored in secure hardware during generation and signing, preventing extraction or theft.
(2) Mitigation of security vulnerabilities, hacks, and insider threats: Prevents unauthorized access through fine-grained, instantly revocable signing session controls.
(3) Prevents costly errors: Allows custom policy definitions for each key, using built-in policies such as validator slashing prevention to prevent upgrade errors and vulnerabilities in validator clients.
(4) Supports multiple custody settings: Can manage its own keys or end-user keys.
(5) Encrypted key import and export: Enables direct import and export of encrypted keys, avoiding key exposure.
Secondly, Lombard Consortium:
Lombard Consortium is a decentralized state machine for shared ownership and asset management among various members. Its primary functions include:
(1) Creation and validation of deposit addresses: Generates new Bitcoin addresses managed by CubeSigner when users request deposits.
(2) Verification of deposits and generation of signature data: Confirms the existence and validation of deposit transactions, verifies transaction amounts and deposit addresses.
(3) Bitcoin staking and unstaking: Selects appropriate finality providers for staking and unstaking.
(4) Payment of unstaked Bitcoin: Facilitates the payment process for unstaked Bitcoin.
Consortium deploys on trusted network nodes using the Raft algorithm, ensuring decentralized consensus and data notarization. Members can become part of the Consortium’s governance and operations through a multi-step approval and infrastructure deployment process, thereby participating in Lombard’s governance and operations.
Finally, Smart Contracts:
Lombard’s smart contract system consists of three main parts:
(1) Consortium governance smart contracts: Read and submit LBTC-related state changes to ensure all operations are transparent and verifiable.
(2) ERC-20 token smart contracts: Facilitate the minting and burning of LBTC tokens.
(3) Delayed proxy upgrade smart contracts: Delay proxy upgrades by one hour to increase security.
In addition, Lombard employs multiple layers of security measures.
Lombard uses Cubist’s Multi-Factor Authentication Wallets (MFA Wallets), requiring multiple security checks and approvals for each transaction to prevent unauthorized access. Furthermore, transactions are validated and notarized by the Lombard Consortium composed of industry leaders, ensuring decentralized security.
Through innovative initiatives and robust security measures, Lombard is gradually realizing its goals, offering more opportunities and growth space for Bitcoin holders and the entire DeFi ecosystem.
Summary:
Lombard’s rapid development and significant achievements are bolstered by its strong ecosystem partnerships. Collaborations with industry giants such as ByBit, OKX, Bitget provide extensive market access and liquidity support, promoting LBTC and enhancing its market influence. Shared Security Alliance and Babylon, core partners of Lombard’s pledging protocol, provide seamless, secure support for Bitcoin asset pledging, while Staking Circle, Ethereum, Mantle, Zircuir, Scroll, Linea offer technical support for LBTC’s cross-chain integration and compatibility across different blockchain networks.
In conclusion, Lombard is leading innovation in the Bitcoin rehypothecation ecosystem, unlocking Bitcoin’s immense potential in DeFi through its flagship product LBTC and cooperation with the Babylon protocol. With the completion of a $16 million seed round, Lombard will continue advancing its ecosystem, providing users with more liquidity and revenue opportunities.
Exciting prospects lie ahead for Lombard’s future development.