CoinWorld Report:
In the realm of BTC (re)staking, there is currently a trend of excessive construction on the supply side, while the size of the market on the demand side remains unknown.
Written by: 0xMaiaa, BeWater Research
Following the launch of the first phase of the Babylon mainnet a month ago, the introduction of BTC LST on Pendle, and various BTC wrapping initiatives, market attention has been continuously redirected back to BTCFi. The following content will cover recent major updates on BTC (re)staking and BTC pegged assets:
BTC (Re)staking:
The Importance of Ecological Strategy for BTC LST
Pendle Enters BTCFi
SatLayer Joins the BTC Re-staking Market Competition
BTC Pegged Assets:
Coinbase Launches cbBTC
Multi-chain Expansion of WBTC
Active Expansion of FBTC
2/ Current Competition Landscape for BTC LST:
After rapidly reaching the 1000 BTC cap in Babylon Stage 1, competition among BTC LSTs has intensified, with various parties vying for staking and yield opportunities for BTC and its wrapped assets. Over the past 30 days, @Lombard_Finance has achieved rapid growth, with a deposit volume of 5.9k BTC, reaching the highest TVL and surpassing the long-standing leader, @SolvProtocol. Lombard has gained a competitive advantage at this stage by forming a strategic partnership with top re-staking protocol @symbioticfi, providing its participants with more diverse re-staking yield sources and DeFi participation opportunities from the ETH ecosystem.
3/ The Importance of Ecological Strategy for BTC LST:
In the BTC LST field, ecological strategy has become a key influencing factor in the current competitive landscape. Unlike ETH LRT, which benefits from the mature DeFi ecosystem of ETH and ETH L2 to support downstream applications, BTC LST currently faces more complex considerations, including downstream DeFi application scenarios, the development stage of BTC L2, the combination of BTC pegged assets across various chains, and integration with re-staking platforms. At this stage, the choice of ecological strategy will impact growth speed and the acquisition of early market share. The specific situations of various BTC LST providers are as follows:
4/ Currently, @Lombard_Finance strategically focuses on the development of the ETH ecosystem. By collaborating with @symbioticfi and @Karak_Network, Lombard offers rich external rewards beyond @babylonlabs_io for stakers. Meanwhile, $LBTC, as the first BTC LST, has gained support from ETH-based re-staking protocols. Additionally, in terms of LST utility, Lombard is actively promoting leveraged strategies for $LBTC on ETH, with important partners including @pendle_fi, @GearboxProtocol, and @zerolendxyz. Notably, with http://Ether.Fi accepting $LBTC deposits, $LBTC will benefit from all future downstream applications related to $eBTC, further enhancing its competitive advantage.
5/ In contrast to Lombard’s focused strategy, @SolvProtocol and @Bedrock_DeFi are actively pursuing multi-chain expansion, with ecological development encompassing both upstream deposit acceptance and downstream application construction. Currently, the main liquidity for SolvBTC.BBN and uniBTC is concentrated on the BNB and ETH chains, while also injecting BTC liquidity into other L2s. A noteworthy strategy from Solv is that users need to deposit SolvBTC to convert it into SolvBTC.BBN to participate in Babylon, which will drive market demand for SolvBTC and solidify Solv as the core business of the Decentralized Bitcoin Reserve.
6/ Supported by @BinanceLabs, @LorenzoProtocol and @pStakeFinance are focusing on building on the BNB chain during their initial launch phase. They have already supported deposits of $BTCB and minted LSTs – $stBTC and $yBTC on the BNB chain. Lorenzo’s uniqueness lies in its construction of a yield market based on BTCFi, adopting a structure that separates liquid principal tokens (LPT) and yield accumulation tokens (YAT), similar to the Pendle model, making yield strategies based on BTC re-staking more flexible.
7/ From another perspective, the different ecological strategies of each BTC LST—acceptance of upstream BTC derivatives and minting of LST—will impact the liquidity of BTC pegged assets and DeFi adoption within each ecosystem. As the BTC LST market continues to expand, this trend will become increasingly pronounced, triggering a TVL defense battle among various chains.
8/ Pendle is entering BTCFi:
Recently, Pendle has integrated four BTC LSTs into its points market, including $LBTC, $eBTC, $uniBTC, and $SolvBTC.BBN. The liquidity and total TVL of each LST on Pendle are shown in the accompanying figures. Among them, the actual adoption of $LBTC is higher than the surface value in the LBTC (Corn) pool. Since 37% of $eBTC is supported by $LBTC, Pendle’s integration of $eBTC will also benefit Lombard, thus providing $LBTC holders with more opportunities to optimize yield strategies.
9/ In addition to $eBTC, the other three LSTs have partnered with another important participant, @use_corn. Corn is an emerging ETH L2 with unique designs of veTokenomics and Hybrid Tokenized Bitcoin. Since Corn’s gas token $BTCN will be minted through a hybrid method, current collaborations indicate the future potential for trusted BTC LSTs to be accepted for minting $BTCN. The future integration pathway may be: Wrap BTC → BTC LST → BTCN → DeFi. This structure adds another layer of nested leverage to the BTCFi system, allowing users to achieve multiple returns across more protocols, while also introducing new systemic risks and the possibility that the points system of various protocols may be over-mined, leading to returns far below expectations. The points release situation for Corn and Lombard can be referenced at: https://x.com/PendleIntern/status/1835579019515027549
10/ Points leverage is one of the key scenarios in yield asset strategies, including ETH LRT and BTC LST. As a leader, Pendle’s integration of BTC LST will significantly drive broader application trends in the DeFi ecosystem. Currently, @GearboxProtocol has introduced $LBTC into its points market, while @PichiFinance has also indicated that BTC LST integration will occur in the near future.
11/ SatLayer joins the BTC re-staking market competition: @satlayer has entered the BTC re-staking field, becoming a new competitor to @Pell_Network. Both accept re-staking of BTC LSTs and use them to provide security for other protocols, similar to @eigenlayer practices. As a pioneer in the BTC re-staking sector, Pell has accumulated a TVL of $270 million, integrating nearly all major BTC derivatives across 13 networks. On the other hand, SatLayer is rapidly expanding in the market following its funding announcement led by @Hack_VC and @CastleIslandVC last month.
12/ SatLayer is currently deployed on Ethereum and supports multiple BTC LSTs including WBTC, FBTC, pumpBTC, SolvBTC.BBN, uniBTC, and LBTC, with further integrations anticipated. As more homogeneous re-staking platforms emerge, competition for liquidity around BTC and its variant assets will intensify. While this provides participants with an additional layer of nested yield opportunities, it also shows signs of oversupply in the re-staking sector’s infrastructure.
13/ Current State of BTC Wrapped Tokens:
Since the controversy sparked by Justin Sun’s involvement in the custody of WBTC, competition in the wrapped BTC market has intensified. The main competitive alternative assets currently include @Binance’s $BTCB (supply 65.3k), @MerlinLayer2’s $mBTC (supply 22.3k), @TheTNetwork’s $tBTC (supply 3.6k), @0xMantle’s $FBTC (supply 3k), as well as various previously mentioned BTC LST assets.
14/ Coinbase Launches cbBTC:
Coinbase launched the wrapped asset $cbBTC last week, which is supported by its custody, with a current supply of 2.7k. $cbBTC is deployed on the Base and Ethereum networks and has gained support from several mainstream DeFi protocols including @0xfluid, with plans to expand to more chains in the future. Additionally, BTC LSTs @Pumpbtcxyz and @SolvProtocol quickly indicated their intention to collaborate with Base following the launch of $cbBTC, showcasing the development potential of $cbBTC within BTCFi.
15/ Multi-chain Expansion of WBTC:
Despite security concerns, $WBTC still holds over 60% market share in the wrapped BTC market. @BitGo recently announced the deployment of $WBTC on Avalanche and BNB chains, aiming to solidify its market position through the all-chain replaceable token (OFT) standard by @LayerZero_Core. However, the adoption rate of WBTC continues to decline, as leading DeFi protocols such as @aave and @SkyEcosystem begin to move WBTC off as collateral, which will influence more DeFi protocols’ attitudes towards WBTC.
16/ Active Expansion of FBTC:
Managed by Mantle, Antalpha, and Cobo, $FBTC has been deployed on Ethereum, Mantle, and BNB chains. Through the “Sparkle Campaign,” @FBTC_official is actively promoting wider adoption of $FBTC within the BTCFi domain. In the BTC (re)staking space, $FBTC has been adopted by Solv, BedRock, PumpBTC, and Pell, providing early adopters with Sparks point incentives.
17/ Currently, various wrapped BTC assets are actively striving to be integrated by major DeFi protocols and accepted by a broad user base to contend for the market position of the next $WBTC. In addition to existing wrapped BTC assets, new entrants like @ton_blockchain’s $tgBTC and @Stacks’ $sBTC will soon join this competition.
18/ Amid the ongoing growth trend in BTCFi, BTC (re)staking and BTC pegged assets are two key areas worth continuous attention. In the BTC (re)staking field, there is a trend of excessive construction on the supply side, while the size of the market on the demand side remains unknown. In the current early competitive landscape, differentiated ecological strategies and unique downstream gameplay have become the key influencing factors in the competition among various BTC LSTs. On the other hand, the trend of various BTC pegged assets nesting into each other also introduces new systemic risks, along with the possibility that various protocols may be over-mined, leading to minimal returns. For BTC pegged assets, trust remains a crucial issue. Exchanges, L2s, and BTC LSTs are actively developing their respective BTC pegged assets through different solutions, striving to be accepted by mainstream DeFi protocols and a broad user base, thereby quickly capturing the market lost by WBTC
