Whereas we have been nonetheless fearful in regards to the centralization of WBTC, BTC’s liquidity re-staking has arrived.
eBTC not solely solves the centralization downside of BTC but in addition permits BTC to generate staking and re-staking rewards whereas reaching distant staking.
Notice that this eBTC is the re-staked model of BTC from ether.fi.
It’s not to be confused with the eBTC from ebtc.finance beneath. The latter is merely an artificial asset primarily based on stETH, with the underlying asset nonetheless being ETH, synthesized by way of over-collateralization. In contrast to the eBTC talked about above, this pink eBTC’s advantages nonetheless come from ETH staking and re-staking rewards.
You could be questioning, what’s the supply of ether.fi’s eBTC rewards?
There are two sources: one is the staking rewards from Bitcoin, and the opposite is the re-staking rewards from Bitcoin.
BTC’s re-staking rewards, much like ETH’s re-staking rewards, come from Eigenlayer’s AVS service. When you’re unclear, please take a look at this text titled “Demystifying Re-Staking.”
Right this moment, the main target is on BTC staking rewards. The Babylon venture makes all of this doable. I’ll element methods to stake BTC, re-stake, and leverage stake and re-stake shortly.
To grasp the “why,” you first want to know the Babylon venture and the way it differs from Eigenlayer.
Let’s begin with the similarities — each initiatives are backed by educational students.
EigenLayer was based by former College of Washington affiliate professor Sreeram Kannan. Kannan carefully collaborated with David Tse (founding father of Babylon) throughout his postdoctoral analysis at UC Berkeley and Stanford.
Babylon, co-founded by Stanford engineering professor David Tse, goals to make use of Bitcoin as a staking asset to boost the safety of different blockchains.
Babylon adopts a way much like EigenLayer however focuses extra on Bitcoin. Each initiatives improve blockchain safety by way of staking mechanisms and supply rewards to customers, but they differ considerably in technical structure, sources of rewards, and supported software eventualities.
Babylon is like giving a key to the dormant Bitcoin, permitting it to take part in PoS chain staking and earn rewards.
Babylon is an modern venture that introduces staking mechanisms for Bitcoin, enabling the combination of Bitcoin with proof-of-stake (PoS) chains by way of distant staking. Historically, Bitcoin, as an asset in a proof-of-work (PoW) system, lacks staking performance and can’t supply customers staking rewards like Ethereum (ETH). Babylon breaks this limitation, permitting Bitcoin holders to stake BTC to supply financial safety for PoS chains and earn staking rewards. This can be a important innovation in Bitcoin staking, notably in avoiding cross-chain bridge safety dangers, because it doesn’t require transferring Bitcoin to PoS chains by way of conventional cross-chain strategies.
Though Babylon innovatively introduces Bitcoin staking, it faces some technical limitations. Firstly, Bitcoin makes use of a UTXO mannequin, missing Ethereum-like native good contract performance. Which means Babylon can solely supply static capital safety, unable to assist companies like oracles, cross-chain bridges, or knowledge availability layers that require advanced on-chain logic and real-time interactions. Whereas Babylon’s staking mechanism can improve PoS chain safety by way of timestamping and a reliable slashing mechanism, it lacks the aptitude to deal with dynamic knowledge verification and cross-chain asset administration, leading to comparatively restricted software eventualities.
There’s some overlap between the goal audiences of Babylon and Eigenlayer, as each can present safety for PoS chains.
Comparatively, Babylon has a nominal benefit when serving PoS chains, as Bitcoin’s popularity is clearly better than that of Ethereum. Nonetheless, Eigenlayer has a broader scope and might supply extra AVS companies, resembling oracles, cross-chain bridges, and knowledge availability layers.
Thus, whereas Babylon and Eigenlayer have some competitors, collaboration is extra prevalent, particularly within the re-staking area.
The liquidity staking (LBTC) and re-staking (eBTC) of Bitcoin are main the crypto world into a brand new period.
On this course of, BTC is not simply conventional “digital gold”; it now has extra liquidity and utility. By means of liquidity staking and re-staking, Bitcoin can take pleasure in the advantages of each worlds: it could function a extremely safe retailer of worth and take part in staking throughout totally different blockchains to earn rewards.
Due to Ethereum’s innovation in re-staking, Bitcoin’s re-staking appears to have materialized in a single day.
LBTC is a liquidity staking token for Bitcoin on good contract platforms like Ethereum, much like stETH after Ethereum staking. In different phrases, when customers stake BTC, they obtain an equal quantity of LBTC, which will be traded and utilized in different DeFi functions identical to the unique BTC. This brings unprecedented flexibility to Bitcoin holders: they’ll earn staking rewards with out giving up BTC’s liquidity.
With LBTC, Bitcoin is not a static asset however can move flexibly like water within the DeFi world.
Because of Ethereum’s wealthy DeFi protocol ecosystem, resembling lending, liquidity mining, and yield aggregators, BTC holders can take part in these protocols by way of LBTC, incomes extra rewards. This method not solely preserves Bitcoin’s safety features but in addition enhances its utility.
Thus, the Bitcoin that repeatedly generates rewards — LBTC — has been born. Take a look at the asset innovation introduced by stETH, and also you’ll perceive how huge LBTC’s future might be.
Due to Ethereum’s re-staking innovation, Bitcoin’s liquidity re-staking appears to have occurred in a single day. The eBTC from ether.fi is theoretically constructed on LBTC, however for person expertise, you’ll be able to stake WBTC instantly on the Ethereum blockchain to obtain eBTC. This methodology has already been utilized to Ethereum’s liquidity re-staking: customers don’t have to personal staked ETH (like stETH) however can take part in re-staking instantly with ETH, having fun with each staking and re-staking rewards in a single go.
The precept behind that is much like Eigenlayer’s ETH re-staking. Which means re-stakers not solely obtain the unique BTC staking rewards but in addition achieve extra re-staking rewards from the safety companies supplied by Eigenlayer. This twin reward mannequin maximizes potential returns for stakers.
The core worth of liquidity staking and re-staking lies in offering Bitcoin holders with extra alternatives to make their beforehand locked capital extra energetic. In liquidity staking, staking BTC not means locking up property; customers can proceed to function throughout the DeFi ecosystem, resembling utilizing LBTC as collateral for loans or offering liquidity to earn charges. Right here, you’ll be able to uncover 20 methods to earn with LBTC.
At the moment, ether.fi additionally presents 4 methods to earn with eBTC.
Because the expertise of Bitcoin liquidity staking and re-staking matures, future Bitcoin holders is not going to solely depend on value appreciation for wealth development. They will acquire a steady stream of rewards by way of varied protocols and companies whereas retaining their Bitcoin holdings by way of staking and re-staking mechanisms.
Sooner or later, we are able to anticipate to witness the emergence of extra multi-chain Bitcoin liquidity derivatives, resembling cross-chain appropriate staking tokens and extra platforms supporting re-staking companies, enriching the Bitcoin ecosystem. It will rework Bitcoin from a “passive holding” asset into an “actively appreciating” asset.
This is applicable solely to eventualities the place you may have Bitcoin on the Bitcoin blockchain.
Click on the hyperlink to enter the web page beneath.
After connecting your pockets, verify the goal handle for LBTC as proven within the picture beneath.
As soon as confirmed, you’ll proceed to the subsequent step, the place you’ll be able to select methods to stake BTC; it’s beneficial to pick direct staking on the left.
Click on the copy button on the arrow place within the picture above, and ship BTC to that handle by way of your Bitcoin pockets or centralized alternate. After staking, it’s advisable to finish the re-staking beneath. At the moment, ether.fi has extra associated protocols airdropping, and re-staking can additional amplify your airdrop rewards.
There are two methods to attain BTC re-staking: one is the standard re-staking on ether.fi, and the opposite is offering liquidity on the curvefi web site.
In case you have WBTC on Ethereum, or if you have already got LBTC, click on to attach and enter the web page beneath.
After connecting your pockets, choose WBTC or LBTC and click on the Deposit button beneath.
Click on the hyperlink to enter the web page beneath.
Discover the arrow place within the picture above; you’ll discover that there’s comparatively little WBTC within the eBTC-WBTC pool, so that you solely have to deposit WBTC to obtain further rewards. Preserving eBTC at 0 whereas inputting 1 WBTC will yield 0.0265% in rewards.
Don’t fear about whether or not ether.fi acknowledges this re-staking, as that is additionally advocated by ether.fi, and staking right here will earn you 4x factors, as proven within the picture beneath.
If, like me, you’re optimistic in regards to the future returns from BTC staking and re-staking — primarily varied airdrops — you’ll be able to leverage Pendle to stake and re-stake considerably.
Nonetheless, earlier than leveraging LBTC and eBTC, it’s important to know the underlying rules.
Leverage is achieved by way of Pendle’s mechanism of separating principal and yield, permitting you to buy yield tokens (YT). For instance, I purchased YT as proven within the picture beneath.
I bought 0.061 YT for LBTC and 0.069 YT for eBTC, every costing round 100 USD. When you don’t purchase YT and need to stake LBTC or eBTC instantly, how a lot BTC would you should stake?
For LBTC, I would wish to stake roughly 0.216 LBTC to obtain 0.06057 YT, as proven within the picture. The worth of 0.216 LBTC is about 13,426.37 USD, which means I spent 100 USD to borrow 0.216 LBTC for 97 days, gaining rights to varied airdrop factors — this leads to over 100 occasions leverage.
Now, eBTC, to acquire 0.069 YT, I have to stake 0.173 eBTC, as proven within the picture.
This implies I spent 100 USD to buy rights to earn varied airdrop factors from eBTC over the subsequent 97 days, reaching comparable leverage exceeding 100 occasions.
My threat is that if the entire airdrop earnings don’t attain 200 USD, I’ll incur a loss. Happily, I solely invested 200 USD, limiting my loss.
Take into account that after 97 days, on December 25, 2024, your YT can be nugatory, whereas all earlier airdrop factors can have been distributed to the pockets holding the YT.
With an understanding of Pendle’s leveraging rules, for those who’re fascinated with making an attempt it out, preserve studying!
After clicking the hyperlink to attach your pockets, you’ll enter the next web page.
First, let’s see methods to leverage LBTC. Click on on the YT LBTC on the left aspect, as proven within the picture beneath.
Within the new web page, the method is much like an everyday swap. Discover the token you need to pay with; I instantly used ETH to cut back steps and save on gasoline charges, as proven within the picture.
After clicking the Swap button, a brand new web page will pop up — simply click on Swap once more.
Lastly, you’ll have to signal along with your pockets. You’ll discover it prices 0.002566 ETH in gasoline charges, which is comparatively excessive.
Equally, discover YT eBTC and click on on the Buy YT eBTC possibility.
Proceed utilizing ETH for the acquisition. Click on Swap, then signal along with your pockets.
Click on on the Dashboard menu → YT tab to see the categories and quantities of YT you simply bought. You possibly can promote your YT by way of Factors Markets anytime earlier than its worth drops to 0, which is earlier than December 26, 2024.
About 24 hours later, by clicking the hyperlink, yow will discover that the airdrop factors associated to LBTC have began distributing. This website requires an invite for the factors to activate; right here’s a one-time invite code: pr3e-hg8d k747–3jae 5ffj-c95p.
Click on the hyperlink to test the LBTC factors; in lower than two days, it has gathered 358.69 factors.
Now, let’s check out the re-staking factors for eBTC. Click on the hyperlink, join your pockets, and enter the web page proven beneath. You possibly can see that the eBTC Loyalty PTS is now at 100.26K.
Due to the modular design of blockchain, the re-staking mechanism for BTC (from LBTC to eBTC) has been almost realized in a single day. This similar idea has additionally been utilized to the leveraged re-staking of BTC, as ETH’s leveraged re-staking was applied earlier. This innovation is like introducing a brand new YT product on the Pendle platform — the core mechanism hasn’t modified; it’s merely been utilized to Bitcoin.
This modular method not solely enhances the flexibleness of decentralized finance (DeFi) but in addition permits advanced monetary devices to be assembled like constructing blocks, driving fast improvement and enlargement of all the blockchain ecosystem.
Every innovation in blockchain opens a brand new door, giving extra property the identical alternatives. In fact, moreover modularity, the position of tokenization can also be important, which we are able to focus on one other day.