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

With the launch of the first phase of the Babylon mainnet, the introduction of BTC LST on Pendle, and the various releases of wrapped BTC, the market's attention towards BTCFi has been continuously increasing. This article will provide an in-depth discussion on the latest developments in BTC (re) staking and the field of BTC-pegged assets.

BTC (Re) staking market status

After quickly reaching the 1000 BTC cap in Babylon Stage 1, the competition among BTC LSTs has intensified. Over the past 30 days, Lombard Finance has experienced rapid growth, achieving the highest TVL with a deposit amount of 5.9k BTC, surpassing the long-time leader Solv Protocol.

Lombard has established a strategic partnership with the top re-staking protocol Symbiotic, providing participants with richer re-staking yield sources and DeFi participation opportunities from the ETH ecosystem, thereby gaining a current competitive advantage.

The Importance of Ecological Strategy

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

Different BTC LST providers have adopted different strategic directions:

1. Lombard Finance focuses on the development of the ETH ecosystem and collaborates with Symbiotic and Karak Network to provide rich external rewards for stakers. $LBTC, as the first BTC LST, has gained support from the ETH re-staking protocol.

2. Solv Protocol and Bedrock DeFi are actively expanding across multiple chains, covering upstream deposit reception and downstream application development. The main liquidity of SolvBTC.BBN and uniBTC is concentrated on BNB and ETH chains, while also injecting BTC liquidity into other L2s.

3. Lorenzo Protocol and pStake Finance focused on building the BNB chain in the initial phase, supporting the acceptance of $BTCB deposits, and respectively minted LST - $stBTC and $yBTC on the BNB chain.

Pendle Enters BTCFi

Pendle has integrated four types of BTC LST ($LBTC, $eBTC, $uniBTC, and $SolvBTC.BBN) into its points market. Among them, 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 indirectly benefits Lombard.

Except for $eBTC, the other three LSTs have all collaborated with Corn. Corn is an emerging ETH L2 with two unique designs: veTokenomics and Hybrid Tokenized Bitcoin. In the future, there may be an integrated path from Wrap BTC → BTC LST → BTCN → DeFi, adding new nested leverage to the BTCFi system.

SatLayer Joins the BTC Re-staking Market

SatLayer, as a newcomer, competes with Pell Network. Both accept re-staking of BTC LST and use it to provide security for other protocols. Pell has accumulated a TVL of $270 million, integrating major BTC derivatives across 13 networks. SatLayer is also rapidly expanding its market after securing funding.

BTC Wrapped Token Market Landscape

Since Justin Sun's involvement in the custody of WBTC has sparked controversy, competition in the wrapped BTC market has intensified. Major competing alternative assets include Binance's $BTCB, Merlin's $mBTC, TN Network's $tBTC, Mantle's $FBTC, and various BTC LST assets.

Coinbase recently launched the custodially supported wrapped asset $cbBTC, which has gained support from multiple mainstream DeFi protocols and plans to expand to more chains. Despite security concerns, $WBTC still holds over 60% of the wrapped BTC market share, but its adoption rate continues to decline.

$FBTC is actively promoting widespread adoption in the BTCFi space through the "Sparkle Campaign" and has been accepted by multiple BTC (re) staking platforms.

Summary

BTCFi continues to grow, and BTC (re) staking and BTC pegged assets are two key sectors. In the field of BTC (re) staking, there is a tendency for excessive supply-side construction and internal competition, where differentiated ecological strategies and unique downstream gameplay become the key to competition. The interwoven nature of BTC pegged assets introduces new systemic risks, while there is also the possibility of being over-mined.

For BTC-pegged assets, trust remains a core issue. Exchanges, L2s, and BTC LSTs are actively developing their respective solutions to gain acceptance from mainstream DeFi protocols and users, aiming to capture the market share lost by WBTC.