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

BTC (re) staking and the BTC pegged asset market have recently shown intense competition. With the launch of the first phase of the Babylon mainnet, Pendle's introduction of BTC LST, and the rollout of various wrapped BTC products, market attention has once again turned to the BTCFi sector.

BTC (Re) Staking Market Overview

The competition between BTC LST continues to heat up, with all parties vying for the staking yield entry of BTC and its wrapped assets. Over the past 30 days, Lombard Finance has seen rapid growth, achieving the current highest TVL with a deposit amount of 5.9k BTC, surpassing the long-time leader, Solv Protocol. Lombard has gained a competitive advantage at this stage by reaching a strategic cooperation with the top re-staking protocol Symbiotic, providing its 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 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 pegged assets on various chains, and integration with re-staking platforms, among others.

Main BTC LST Provider Strategy

1. Lombard Finance focuses on the development of the ETH ecosystem, providing rich external rewards for stakers through partnerships with Symbiotic and Karak Network, beyond Babylon. $LBTC, as the first BTC LST, receives support from the ETH re-staking protocol. In terms of LST utility, Lombard is actively promoting leveraged plays of $LBTC on ETH, with important partners including Pendle, Gearbox Protocol, and ZeroLend.

2. Solv Protocol and Bedrock DeFi are both actively expanding across multiple chains, with ecosystem development covering the acceptance 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.

3. Lorenzo Protocol and pStake Finance will focus on building the BNB chain during the initial launch phase. They have already supported the reception of $BTCB deposits and minted LST - $stBTC and $yBTC on the BNB chain respectively. What makes Lorenzo unique is the construction of a yield market based on BTCFi, adopting a structure that separates Liquidity Principal Tokens (LPT) and Yield Accumulation Tokens (YAT).

Pendle Enters BTCFi

Pendle has gradually integrated four types of BTC LST into its points market, including $LBTC, $eBTC, $uniBTC, and $SolvBTC.BBN. Among them, the actual adoption 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 benefit Lombard indirectly.

Apart from $eBTC, the other three LSTs have all collaborated with Corn. Corn is an emerging ETH L2 that features two unique designs: veTokenomics and Hybrid Tokenized Bitcoin. The potential integration path in the future 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.

SatLayer Joins BTC Re-staking Market Competition

SatLayer has entered 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 $270 million in TVL, integrating almost all major BTC derivatives across 13 networks. SatLayer is currently deployed on Ethereum and supports receiving multiple BTC LSTs, with more integrations expected.

Current Status of BTC Wrapped Token Market

The competition in the wrapped BTC market has intensified. 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.

1. Coinbase launches cbBTC: Coinbase has launched the custodial supported wrapped asset $cbBTC, 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, with plans to expand to more chains in the future.

2. Multi-chain Expansion of WBTC: Despite concerns about security, $WBTC still holds over 60% of the wrapped BTC market share. BitGo recently announced the deployment of $WBTC on the Avalanche and BNB chains, aiming to strengthen its market position through the LayerZero's fully chain-compatible token (OFT) standard.

3. The Active Expansion of FBTC: $FBTC has been deployed on Ethereum, Mantle, and BNB chains. Through the "Sparkle Campaign", FBTC is actively promoting the broader adoption of $FBTC in the BTCFi space.

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

In the continued growth trend of BTCFi, BTC (re) staking and BTC pegged assets are two key areas worth ongoing attention. In the field of BTC (re) staking, there is currently a trend of excessive construction 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 playstyles have become key influencing factors in the competition among various BTC LSTs. On the other hand, the trend of various BTC pegged assets being intertwined has also introduced new systemic risks, along with the possibility of over-mining across protocols, leading to minimal final returns.

For various BTC-pegged assets, trust remains a key issue. Exchanges, L2s, and BTC LST parties are actively developing their respective 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.