BTC (Re)staking and the competition in the BTC collateral asset market intensifies

Recently, with the launch of the first phase of the Babylon mainnet, the introduction of BTC LST on Pendle, and various wrapped BTC asset offerings, the BTCFi sector has once again become the market focus. This article will outline the latest developments in BTC (re) staking and the BTC pegged asset domain.

BTC (Re) Staking Market Dynamics

The competition between BTC LST is becoming increasingly fierce, with all parties vying for the staking income entry of BTC and its wrapped assets. Over the past 30 days, Lombard Finance has experienced rapid growth, reaching the highest TVL of 5.9k BTC in deposits, surpassing the long-time leader Solv Protocol.

Lombard has gained a competitive advantage by partnering with the top re-staking protocol Symbiotic, providing participants with richer re-staking yield sources and DeFi participation opportunities from the ETH ecosystem.

In the BTC LST field, ecological strategy has become a key influencing factor in the current competitive landscape. Unlike ETH LRT, which benefits from a mature DeFi ecology, BTC LST faces more complex considerations, including downstream DeFi application scenarios, the development stage of BTC L2, the combination with various chain BTC pegged assets, and the integration with re-staking platforms.

Currently, Lombard Finance focuses on the development of the ETH ecosystem. Through collaboration with Symbiotic and Karak Network, Lombard provides rich external rewards for stakers. LBTC, as the first BTC LST, has gained support from the ETH restaking protocol. In addition, Lombard is actively promoting the leveraged play of LBTC on ETH, with important partners including Pendle, Gearbox Protocol, and Zerolend.

In contrast, Solv Protocol and Bedrock DeFi are actively pursuing multi-chain expansion, with ecosystem development covering upstream deposit reception and downstream application construction. The main liquidity of SolvBTC.BBN and uniBTC is concentrated on BNB and ETH chains, while also injecting BTC liquidity into other L2.

Lorenzo Protocol and pStake Finance will focus on BNB chain development in the initial stages. They have supported BTCB deposits and minted LST - stBTC and yBTC on the BNB chain. Lorenzo's uniqueness lies in the construction of a yield market based on BTCFi, adopting a structure that separates liquid principal tokens (LPT) and yield accumulation tokens (YAT).

Pendle Enters BTCFi

Pendle recently integrated four BTC LSTs (LBTC, eBTC, uniBTC, and SolvBTC.BBN) into its points market. The actual adoption of LBTC is higher than the surface value, as 37% of eBTC is backed by LBTC, and Pendle's integration of eBTC also benefits Lombard indirectly.

Except for eBTC, the other three LSTs have collaborated with Corn. Corn is an emerging ETH L2 with two unique designs: veTokenomics and Hybrid Tokenized Bitcoin. This architecture adds another layer of leverage to the BTCFi system, allowing users to take advantage of more protocols, but it also introduces new systemic risks.

The points leverage is one of the key scenarios that includes income-generating asset strategies such as ETH LRT and BTC LST. Pendle's integration of BTC LST will greatly drive a broader application trend in the DeFi ecosystem. Currently, Gearbox Protocol has introduced LBTC into its points market, and Pichi Finance has also hinted at integrating BTC LST in the near future.

SatLayer Joins the BTC Re-staking Market Competition

SatLayer enters the BTC re-staking space, becoming a new competitor to Pell Network. Both accept BTC LST for re-staking and use it to provide security for other protocols. Pell has accumulated a TVL of $270 million, integrating all major BTC derivatives across 13 networks.

SatLayer is currently deployed on Ethereum and supports receiving multiple BTC LSTs, with more integrations expected. As more homogeneous re-staking platforms emerge, the competition for liquidity of BTC and its variant assets will become increasingly intense.

BTC Wrapped Token Market Competition

The competition in the BTC market is further intensifying. The main competing alternative assets currently include BTCB (supply 65.3k), mBTC (supply 22.3k), tBTC (supply 3.6k), FBTC (supply 3k), and various BTC LST assets.

A certain trading platform has recently launched a collateralized asset called cbBTC, which is supported by its custody services, with a current supply of 2.7k. cbBTC is deployed on the Base and Ethereum networks and has received support from several mainstream DeFi protocols, with plans to expand to more chains in the future.

Despite security concerns, WBTC still occupies more than 60% of the wrapped BTC market. A certain custody service provider recently announced the deployment of WBTC on Avalanche and BNB chains, aiming to consolidate its market position through the cross-chain fungible token (OFT) standard to leverage multi-chain scaling. However, the adoption rate of WBTC continues to decline, and as leading DeFi protocols begin to remove WBTC as collateral, this trend will influence more DeFi protocols' attitudes towards WBTC.

FBTC has been deployed on Ethereum, Mantle, and BNB chains, and actively promotes widespread adoption in the BTCFi space through the "Sparkle Campaign". In the BTC (re) staking field, FBTC has been adopted by multiple protocols, providing Sparks point incentives for early adopters.

Summary

In the continuing growth trend of BTCFi, BTC (re)staking and BTC pegged assets are two key sectors worth ongoing attention. The BTC (re)staking field has shown a trend of excessive construction on the supply side, while the market size on the demand side remains unknown. Differentiated ecological strategies and unique downstream gameplay have become key influencing factors in the competition among BTC LSTs.

The trend of various BTC pegged assets being nested together introduces new systemic risks, while there is also the possibility of protocols being over-mined and ultimately yielding minimal returns. For BTC pegged assets, trust remains a key issue. Exchanges, L2, and various parties involved in BTC LST are actively developing their respective BTC pegged assets through different solutions, striving to gain acceptance from mainstream DeFi protocols and a wide user base, thereby quickly capturing the market lost by WBTC.