BTC ecological projects start staking, interest-earning and liquidity release tracks may be new opportunities

Original author: Lao Bai, ABCDE investment research partner

Editor's note: Today, Bitcoin staking protocol Babylon has launched the first phase of the BTC staking mainnet launch, and Bitcoin holders can start locking BTC for staking. Fractal Bitcoin, a Bitcoin scalable network developed by UniSat, is also scheduled to be officially launched on September 1, attracting a lot of attention. The Bitcoin ecosystem has been active recently, and many users are optimistic that it will usher in another major ecological explosion in the near future. ABCDE investment research partner Lao Bai published his analysis of the development of the Bitcoin ecosystem on X. BlockBeats reprinted the full text as follows:

With the launch of Babylon and the opening of Lorenzo staking, let's talk about the recent development of the BTC ecosystem.

Since Ordi popularized the BTC ecosystem, BTC has actually quickly compressed the path that ETH has taken - first popularizing on-chain assets (ERC20) - then expansion solutions (Rollup) - and then Staking/Restaking. However, because there is no stabilizing force like the ETH Foundation and V God to set the direction, BTC is basically a situation where a hundred flowers bloom (luan) at once (qi) (ba) (zao).

On the asset side, Ordinal became popular first, and then Brc20, Arc20, Src20, Orc20 and other XX20s, all of which poured out like crazy. Many people were delighted last year that the BTC security model was likely to be solved (after another 20 to 30 years and four or five halvings, the block reward can be so small that it can be ignored. There must be enough TX on the chain to pay the miners for the handling fee). At the end of last year, when Inscription was crazy about new listings, the handling fee did exceed the block reward. You can see it from this chart. At most, the handling fee was 300BTC a day.

Let's take a look at August...only a few BTC in handling fees were collected every day. Rune was popular for a short time in April and May, and then it died out.

After the ETH ICO in 2017, the next expansion plan was represented by Merlin, which first took ETH's EVM ready-made technology stack + a multi-signature side chain to run (Polygon - then called Matic also did the same).

Then the expansion plan, compared to the official Rollup on ETH, BTC has too many more. I drew a simple diagram, which is basically like this (on-chain assets are also included as a technical branch).

Currently, Taproot Asset can only be used for transfers. The most BTC Native (that is, starting from the UTXO feature) is definitely RGB (will the main network in September not be delayed again?), RGB++ & UTXO Stack, and Unisat's Fractal (recently very popular).

In fact, there is a route missing in the diagram, which is the 1.5-layer contract virtual machine extension. The representative is undoubtedly Arch Network. OP_NET, which we talked about recently, also counts, but Arch uses ZKVM and OP_NET uses WASM.

The expansion plan is a path that is too messy because the technology stack is too messy, even messier than the assets, so it is hard to say who will come out in the end. We can only say that each has its own advantages and disadvantages, and it is up to time and the market. In this direction, I have a pessimistic view. Maybe it is not impossible to disprove all of them in the end. After all, BTC’s current main narrative of "electronic gold" does not actually need expansion. Expansion is more for the service of "on-chain assets". If the route of on-chain assets does not take off, expansion will naturally lose its meaning.

Finally, let’s talk about the third stage (Staking/Restaking)

This route is actually more solid than the previous two routes, because it does not conflict with the electronic gold narrative at all, and it is even a perfect supplement - releasing the liquidity of gold and turning gold into an interest-bearing asset!

The most important project at this stage is undoubtedly Babylon, because BTC does not have the yield of POS naturally like ETH. Under the premise of the existence of Lido, EigenLayer's Restaking narrative is more like a booster for ETH itself, or the icing on the cake. And Babylon is a timely help for BTC. By restaking BTC through Trustless and generating yield, BTC is no longer an interest-free asset "gold".

The other two worth mentioning in this route are Solv and http://DLC.Link. The former gives BTC interest + SolvBTC liquidity in the form of Cefi+Defi (one of the entrances to Babylon), while the latter uses DLC technology to mint dlcBTC in the current environment of WBTC suffering from the trust crisis, "Trustless Bridge" BTC to ETH, Solana and other chains to participate in the Defi ecosystem. It is easy to understand and simply regard it as a decentralized and secure version of WBTC.

Let's get back to the point, back to Babylon and Lorenzo. Babylon is undoubtedly benchmarking the ecological niche of EigenLayer, so there will naturally be an asset entrance, that is, the ecological niche of LST/LRT is also extremely important. EigenLayer has Etherfi, Renzo, Puffer, etc., and Babylon also has Solv, Lombard, Lorenzo competing for the entrance.

The differentiation of each company is greater than that of several leading projects on the LRT side of Eigen. For example, Solv, in addition to Babylon, also has income on Cefi, and Defi also has various BTC/ETH-related projects and cooperation income with the second layer, etc.

Lombard has advantages in capital and circle resources, and its issued LBTC is also the most secure one. The CubeSigner (a professional non-custodial key management platform) + Consortium (a quasi-consortium chain node network composed of industry leader nodes) used is the most balanced solution I have seen in terms of security and flexibility.

Lorenzo directly integrates the principal and interest separation function of Pendle, the liquidity pledge token stBTC for the BTC principal part (the same for each pledge project), and the liquidity pledge token YAT for the interest part (different for each pledge project). Lorenzo is also the only project on the market that provides users with YAT and points dual incentive system LST. The current total limit is 250BTC (to ensure user benefits), and there is still a capacity of about dozens of BTC, which is expected to be full soon, first come first served.

Finally, compared with the two directions of issuing assets and expanding the capacity on the BTC chain, the interest generation/liquidity release of BTC is a more visible and tangible direction, which can be seen from Binance's layout in this direction, especially the asset entrance. Among the projects mentioned above, Renzo, Puffer, Babylon, Solv, and Lorenzo Binance have all invested. So you know, this track needs to be taken seriously!

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