Babylon Leads the New Wave of Non-Custodial Bitcoin Staking as Liquidity Solutions Heat Up

Babylon is an innovative non-custodial Bitcoin staking solution. It enables the staking of Bitcoin's native assets through Cryptography, without the need to trust a third party. The staked Bitcoin remains on the Mainnet, secured by a PoW mechanism. The entire process employs a "withdrawable one-time signature" Cryptography method, without relying on any intermediary bridges or accomplices.

This solution allows Bitcoin holders to earn staking rewards while ensuring asset security, creating a new avenue for Bitcoin staking that is expected to fundamentally change the Bitcoin ecosystem. At the same time, introducing Bitcoin staking can alleviate issues such as inflation pressure and startup difficulties faced by small and medium-sized proof-of-stake chains.

The liquidity staking solution for Bitcoin is similar to a demand deposit, allowing users to deposit and withdraw at any time while earning interest. Staked tokens can also be used in other DeFi projects, such as providing liquidity or participating in lending. This can attract more non-mainnet Bitcoin users to participate, such as users holding wrapped Bitcoin on Ethereum.

Essentially, liquid staking can be viewed as a project borrowing users' Bitcoin to stake, using the staking rewards to pay users interest, while the issued staking tokens can be traded on the secondary market. Currently, most Babylon liquid staking tokens are built on Ethereum, with plans to support multiple chains in the future. Except for Lombard, other projects mostly adopt a custodial model, where the project stakes on behalf of users to Babylon, and third-party institutions provide liquidity.

pSTAKE adopts an institutional custody liquidity model. User funds are staked to the pSTAKE address, with liquidity support provided by institutions like Cobo, and the project party then stakes Bitcoin to Babylon. Its official liquid staking token yBTC has not yet been issued, but it is expected to allow users to earn additional yields in other DeFi projects. yBTC will initially be issued on Ethereum and later expand to other Layer 2 networks.

Lorenzo implemented a business model similar to the separation of principal and interest on the Bitcoin liquidity solution. Users send Bitcoin to a multi-signature wallet, which is held in custody by a trusted institution, and receive stBTC as a staking certificate. Lorenzo then stakes the Bitcoin to Babylon. The solution issues three types of tokens: liquidity principal token (LPT), yield accumulation token (YAT), and staking proof token (SPT). This design creates abundant arbitrage and investment opportunities for investors.

Lombard adopts a more decentralized approach, where user funds are directly staked to Babylon rather than being held by a third party. The overall architecture consists of users, Bitcoin nodes, backend, and Consortium. The Consortium is a decentralized state machine that uses the Raft algorithm to achieve consensus and manage the entire staking process. LBTC is Lombard's liquid staking token, redeemable 1:1 with Bitcoin, cross-chain and compatible with DeFi.

Solv integrates the staking rewards from Bitcoin Layer 2, re-staking rewards (, Babylon ), and DeFi yield from Ethereum Layer 2 into SolvBTC. SolvBTC can be seamlessly integrated with other protocols, bringing Bitcoin liquidity into various applications. Solv adopts a decentralized asset management architecture, including built-in security guardians, price oracles, and other modules, establishing trustless process standards through smart contracts.

Bedrock was initially developed for the Eigenlayer ecosystem and later became the largest staking entry on IOTX. It was commissioned by Babylon to develop the BTC liquid staking protocol UniBTC, allowing Ethereum users' wBTC to be staked to Babylon. UniBTC is currently issued on Ethereum.

Master Protocol is a yield aggregation platform that integrates multiple BTC ecosystem projects. Its main products include Master Yield Market and LST Protocol. The former wraps the aggregated Bitcoin ecosystem assets into MSY, which is then split into MPT( principal) and MYT( interest) for users to trade. The latter is a liquidity staking protocol in collaboration with Botanix, aimed at enhancing the liquidity and yield of Bitcoin.

Chakra is a shared modular Bitcoin settlement layer based on zero-knowledge proof, providing unified settlement services for all layer two networks. The funds on the Bitcoin network are hosted by Cobo's MPC scheme and staked to Babylon. tlBTC is issued as a staking certificate, corresponding 1:1 with the staked Bitcoin.