The competition for BTC staking intensifies, reshaping the packaged BTC market landscape

Recently, with the launch of the first phase of the Babylon mainnet, Pendle supporting BTC LST, and the introduction of various wrapped BTC assets, the BTCFi sector has once again become the market focus. This article will provide an in-depth analysis of the latest developments in BTC staking and BTC anchored assets.

BTC Stake Market Landscape

After quickly reaching the 1000 BTC cap in Babylon Stage 1, the competition among BTC LSTs has become increasingly fierce. Over the past 30 days, Lombard Finance has surged to the top of the TVL rankings with a deposit amount of 5900 BTC, surpassing the long-time leader, Solv Protocol. Lombard has gained a competitive edge by partnering with top re-staking protocols to provide users with richer ETH ecosystem re-staking yields and DeFi participation opportunities.

Currently, ecological strategy has become a key factor in the competition for BTC LST. Unlike ETH LRT, BTC LST faces more complex considerations, including downstream DeFi applications, BTC L2 development, integration with various chains' BTC pegged assets, and partnerships with re-staking platforms. The strategies of various BTC LST providers differ.

• Lombard Finance focuses on the development of the ETH ecosystem, providing rich external rewards through cooperation with multiple protocols, and actively promoting leveraged play of LBTC on ETH.

• Solv Protocol and Bedrock are expanding across multiple chains while developing upstream deposit reception and downstream applications.

• Lorenzo Protocol and pStake Finance initially focus on the BNB chain, supporting BTCB deposits and minting corresponding LST.

• Lorenzo also built a yield market based on BTCFi, using a structure that separates liquid principal tokens and yield accumulation tokens.

These different ecological strategies will affect the liquidity of BTC-pegged assets and DeFi adoption in each ecosystem. As the BTC LST market expands, it may trigger cross-chain TVL competition.

Pendle enters the BTCFi

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

Apart from eBTC, the other three types of LSTs are collaborating with Corn (an emerging ETH L2). Corn's unique design includes veTokenomics and hybrid tokenized Bitcoin, which may form an integrated path of "Wrap BTC → BTC LST → BTCN → DeFi" in the future. This architecture adds a new layer of leverage to the BTCFi system, but also introduces new systemic risks.

The point leverage is one of the key scenarios for income-generating asset strategies. The integration of Pendle with BTC LST will drive a broader application trend in the DeFi ecosystem. Currently, Gearbox has introduced LBTC in its point market, and Pichi Finance has also hinted at integrating BTC LST.

New Players in the BTC Staking Market

SatLayer, as an emerging competitor, has joined the BTC staking market and is competing with Pell Network. Both accept BTC LST staking and provide security for other protocols. Pell, as a pioneer, has accumulated $270 million in TVL and integrated major BTC derivatives from 13 networks. After securing financing, SatLayer is rapidly expanding and currently supports multiple BTC LSTs.

As more homogeneous re-staking platforms emerge, the liquidity competition for BTC and its variant assets will become more intense. This provides participants with additional arbitrage opportunities, but also indicates that the supply-side infrastructure in the re-staking sector may be excessive.

BTC Wrapped Token Market Revolution

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

cbBTC launched by Coinbase has been deployed on the Base and Ethereum networks, receiving support from multiple DeFi protocols, and plans to expand to more chains. Some BTC LST providers have quickly indicated their intention to collaborate with Base, showcasing the development potential of cbBTC in the BTCFi space.

Despite security concerns, WBTC still accounts for over 60% of the wrapped BTC market. BitGo recently announced the deployment of WBTC on the Avalanche and BNB chains, implementing multichain expansion through LayerZero's OFT standard. However, the adoption rate of WBTC continues to decline, and as leading DeFi protocols start to remove it from their collateral lists, this trend may influence more protocols' attitudes towards WBTC.

FBTC is actively promoting widespread adoption in the BTCFi space through the "Sparkle Campaign," and has been accepted by multiple BTC stake protocols that provide point incentives.

Currently, various wrapped BTC assets are competing to be integrated into major DeFi protocols and accepted by users in order to contend for the market position of WBTC. In addition to existing assets, new participants such as TON's tgBTC and Stacks' sBTC will also join the competition.

Summary

In the trend of continuous growth of BTCFi, BTC staking and BTC anchored assets are two key areas worth paying attention to. There is a trend of excessive construction on the supply side in the BTC staking field, while the market size on the demand side remains unclear. Differentiated ecological strategies and unique downstream applications have become key to the competition among various BTC LSTs. At the same time, the inter-nesting of BTC anchored assets has introduced new systemic risks.

For BTC-pegged assets, trust remains a core issue. Exchanges, L2s, and BTC LST providers are all developing their own BTC-pegged assets through different solutions, striving to quickly capture the market share lost by WBTC.