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

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

BTC (Re) staking Market Dynamics

Currently, the competition among BTC LSTs is becoming increasingly fierce, with various parties vying for the staking yield entry of BTC and its wrapped assets. In the past month, Lombard Finance has achieved rapid growth, reaching the highest TVL with a deposit amount of 5.9k BTC, surpassing the Solv Protocol, which had long been in a leading position.

Lombard has reached a strategic partnership with the top re-staking protocol symbiotic.fi, providing its participants with a richer source of re-staking yields from the ETH ecosystem and DeFi participation opportunities, thus gaining a competitive advantage at the current stage.

In the BTC LST field, ecological strategy has become a key influencing factor in the current competitive landscape. Unlike ETH LRT, which benefits directly from the mature DeFi ecosystem of ETH and ETH L2 to support downstream token applications, BTC LST currently faces more complex considerations, including downstream DeFi application scenarios, the development stage of BTC L2, the combination with BTC-backed assets on various chains, and integration with re-staking platforms, among others.

At this stage, Lombard Finance is strategically focusing on the development of the ETH ecosystem. Through partnerships with symbiotic.fi and Karak Network, Lombard provides stakers with rich external rewards beyond Babylon, while $LBTC, as the first BTC LST, receives support from the ETH re-staking protocol. In terms of LST utility, Lombard is actively promoting leveraged strategies for $LBTC on ETH, with key partners including Pendle, Gearbox Protocol, and Zerolend. Notably, with Ether.Fi accepting deposits of $LBTC, $LBTC will benefit from all future downstream applications related to $eBTC, further enhancing its competitive advantage.

Unlike Lombard's focus strategy, Solv Protocol and Bedrock DeFi are actively expanding across multiple chains, with ecosystem development covering the reception of upstream deposits and the construction of downstream applications. Currently, the main liquidity of SolvBTC.BBN and uniBTC is concentrated on the BNB and ETH chains, while also injecting BTC liquidity into other L2s. A noteworthy strategy of 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 Decentralized Bitcoin Reserve.

Supported by Binance Labs, Lorenzo Protocol and pStake Finance will focus on building the BNB Chain during the initial launch phase. They already support receiving $BTCB deposits and have minted LST - $stBTC and $yBTC on the BNB Chain respectively. Lorenzo's uniqueness lies in its construction of a yield market based on BTCFi, adopting a structure that separates Liquidity Principal Tokens (LPT) and Yield Accumulation Tokens (YAT), similar to Pendle's model, making the gameplay based on BTC restaking yields more flexible.

From another perspective, the different ecological strategies of various BTC LSTs - the acceptance of upstream BTC derivatives and the minting of LSTs - will affect the liquidity of BTC pegged assets and the adoption of DeFi within each ecosystem. As the BTC LST market continues to expand, this trend will become increasingly significant, triggering a TVL defense battle between different chains.

Pendle Enters BTCFi

Recently, Pendle has successively integrated four types of BTC LST into its points market, including $LBTC, $eBTC, $uniBTC, and $SolvBTC.BBN. Among them, the actual adoption rate of $LBTC is higher than the surface value in the LBTC (Corn) pool. Since 37% of $eBTC is backed by $LBTC, Pendle's integration of $eBTC will also indirectly benefit Lombard, providing $LBTC holders with more opportunities to optimize their yield strategies.

Apart from $eBTC, the other three LSTs are bound in collaboration with another important participant, Corn. Corn is an emerging ETH L2 with two unique designs: veTokenomics and Hybrid Tokenized Bitcoin. As the gas token $BTCN of Corn will be minted through a hybrid method, the current collaboration also indicates the potential for a future trust-based BTC LST to be accepted for minting $BTCN.

The future integration path may be: Wrap BTC → BTC LST → BTCN → DeFi. This architecture adds another layer of nested leverage to the BTCFi system, allowing users to achieve multiple benefits across more protocols, but it also introduces new systemic risks and the possibility that the points system of each protocol may be over-mined, resulting in final returns far below expectations.

The points leverage is one of the key scenarios that include interest-bearing asset strategies such as ETH LRT, BTC LST, etc. As a leader, Pendle's integration of BTC LST will significantly drive the broader application trend of the DeFi ecosystem. Currently, Gearbox Protocol has introduced $LBTC in 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 has entered the BTC restaking space, becoming an emerging competitor to Pell Network. Both accept BTC LST for restaking and use it to provide security for other protocols, similar to EigenLayer's approach. As a pioneer in the BTC restaking field, Pell has accumulated a TVL of $270 million, integrating nearly all major BTC derivatives across 13 networks. On the other hand, SatLayer is also rapidly expanding in the market following the financing announcement last month led by Hack VC and Castle Island VC.

SatLayer is currently deployed on Ethereum and supports receiving various BTC LSTs including WBTC, FBTC, pumpBTC, SolvBTC.BBN, uniBTC, and LBTC, with more integrations expected. As more homogenized restaking platforms emerge, the competition for liquidity regarding BTC and its variant assets will become increasingly intense. While this offers participants an additional layer of nested yield opportunities, it also reveals signs of overcapacity in the supply side infrastructure of the restaking sector.

BTC Wrapped Token Market Dynamics

Since Justin Sun's involvement in the custody of WBTC caused a stir, competition in the wrapped BTC market has intensified. The main competing alternative assets currently include Binance's $BTCB with a supply of 65.3k(, Merlin Layer2's $mBTC with a supply of 22.3k), The T Network's $tBTC with a supply of 3.6k(, Mantle's $FBTC with a supply of 3k), and various BTC LST assets mentioned earlier.

( Coinbase launched cbBTC

Coinbase launched the custodial-backed wrapped asset $cbBTC last week, 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 LST PumpBTC and Solv Protocol quickly expressed their intention to collaborate with Base following the launch of $cbBTC, demonstrating the development potential of $cbBTC in BTCFi.

![BTC )Re(staking supply-side competition intensifies, packaging BTC competes to seize the WBTC market])https://img-cdn.gateio.im/webp-social/moments-4bc4917a87ba7d2926e75ca42d3dcf2d.webp###

( multi-chain expansion of WBTC

Despite concerns about security, $WBTC still holds over 60% of the wrapped BTC market. BitGo recently announced the deployment of $WBTC on Avalanche and BNB chains, aiming to consolidate its market position through the LayerZero cross-chain fungible token )OFT( standard, leveraging multi-chain scalability.

However, the adoption rate of WBTC continues to decline, and as leading DeFi protocols such as Aave and Sky Ecosystem begin to remove WBTC as collateral, this trend will affect the attitudes of more DeFi protocols towards WBTC.

) FBTC's positive expansion

$FBTC, jointly managed by Mantle, Antalpha, and Cobo, has been deployed on Ethereum, Mantle, and BNB chains. Through the "Sparkle Campaign," the FBTC official team is actively promoting the broader adoption of $FBTC in the BTCFi space. In the BTC ###re( staking area, $FBTC has been adopted by Solv, BedRock, PumpBTC, and Pell, providing Sparks points incentives for early adopters.

Currently, various wrapped BTC assets are actively vying to be integrated into major DeFi protocols and accepted by a wide range of users in order to compete for the next $WBTC market position. In addition to the existing wrapped BTC assets, new participants such as TON's $tgBTC and Stacks' $sBTC will soon join this competition.

Summary

In the current trend of continuous growth of BTCFi, BTC (re) staking and BTC pegged assets are two key areas worth continuous attention. In the field of BTC (re) staking, there is a trend of excessive construction and internal competition on the supply side, while the market size on the demand side remains unknown. In the early competitive landscape at this stage, differentiated ecological strategies and unique downstream gameplay have become key influencing factors in the competition for BTC LST. On the other hand, the trend of various BTC pegged assets being interwoven also introduces new systemic risks, along with the possibility of various protocols being excessively mined and ultimately yielding minimal returns.

For various BTC-pegged assets, trust remains a key issue. Exchanges, L2s, and BTC LST parties are actively developing their own BTC-pegged assets through different solutions, striving to be accepted by mainstream DeFi protocols and a wide range of users, thereby quickly capturing the market lost by WBTC.