Author: defioasis

At the middle of this year, the Restaking sector, represented by projects like EigenLayer, Karak, Symbiotic, and Solayer, surpassed a locking scale of $20 billion. As EigenLayer corresponds to Ethereum, Babylon, the most important project in the BTC Staking narrative, has attracted significant market attention since the launch of its testnet. After two rounds of open staking limits, Babylon's direct deposit addresses have exceeded 25,000, with over 23,000 bitcoins deposited.

The Babylon BTC Staking narrative has driven the growth of BTC LST

From last year to the beginning of this year, the Ethereum ecosystem, leveraging EigenLayer for Restaking, has increased the overall ETH staking rate. This has also led to a continuous rise in LST deposits, setting new highs for an extended period, and they remain elevated.

As Babylon's popularity brings the spring breeze of Staking to the Bitcoin ecosystem, it has also promoted the development of LST within its ecosystem. Driven by Babylon's pre-staking activities, the deposit volumes of major BTC LSTs have been steadily increasing, with over 20,000 bitcoins currently participating in BTC LST deposits. Compared to the ETH LST, which exceeds $3.5 billion in scale, BTC LST, with approximately $1 billion in deposits, is still in its early stages.

After Babylon's two staking openings, five LSTs—Bedrock, Lorenzo, PumpBTC, Solv, and Lombard—currently account for nearly 85% of the shares in the Babylon staking pool.

Babylon LST PPC

Due to Babylon's implementation of time-limited staking caps during the initial phase, LST protocols must self-stake and manage points, meaning the number of BTC pre-staked does not equal the final actual staked BTC. This introduces the concept of PPC, or Points Per Coin. When users stake through different LSTs, even if the amount of BTC staked is the same, the points earned may vary, leading to differences in actual returns. For example, during the first round, Babylon limited each LST protocol to a maximum of 250 BTC, while Solv pre-staked more than 250 BTC, necessitating careful point distribution management for Solv.

The PPC of the Babylon LST protocol can be simply understood as the staking success rate of Babylon. According to data from on-chain analyst @lstmaximalist, the PPC ranking for the top five LSTs in Babylon is as follows:

- Bedrock: 5,854

- PumpBTC: 5,235

- Lorenzo: 4,318

- Solv: 3,957

- Lombard: 2,567

Babylon LST Product Overview

Currently, most BTC LST projects are primarily concentrated in the EVM ecosystem. This is partly because, compared to the Bitcoin ecosystem, the infrastructure and ecological environment of EVM are more mature, allowing BTC LSTs to better align with DeFi applications, providing stronger composability and more diverse use cases, thus facilitating capital utilization rates similar to ETH LSTs. Additionally, operating within the EVM ecosystem lowers the user entry barrier, as using and managing wallets on EVM chains is more convenient than on the Bitcoin chain.

The BTC LST product offers Babylon points to users as a basic requirement. Due to the existence of Babylon PPC, BTC LSTs anticipate subsidizing users for any losses in Babylon points through airdropped platform tokens and attract users with a combination strategy of "platform points + DeFi yields." For the community, in addition to focusing on the funding background of LST projects, the composability of star DeFi products is also an important evaluation metric.

Babylon's BTC LST/LRT War

Leveraging first-mover advantages, uniBTC and Solv quickly captured a large share of the market in the early stages, while Lombard, supported by institutional staking, later surpassed Solv. Currently, the BTC LST/LRT market is mainly dominated by Ether Fi, Bedrock, PumpBTC, Lorenzo, Solv, and Lombard.

After two rounds of staking openings, Babylon has secured over 20,000 deposit addresses and more than 23,000 BTC in deposits, bringing its TVL close to Symbiotic, second only to Eigenlayer. Notably, since August, Symbiotic has begun accepting BTC LST assets like LBTC and tBTC for staking, partially diverting market share from BTC LSTs.

With the entry of Pell network and Satlayer into the BTC staking arena, mid-tier projects will also seek opportunities to compete directly with Babylon in the future.

Lessons from the Past: The ETH LRT Path

For most BTC LST/LRT projects relying on Babylon, even though they have not been fully embraced due to starting later, the experiences from ETH LRT are still worth learning from.

EigenLayer has spawned LRT projects like EtherFi, Puffer, and Renzo, which have not only boosted EigenLayer's TVL and visibility but also struggled to surpass the "big brother" in terms of token market capitalization and TVL. The inherent value ceiling of these LRT tokens relies on EigenLayer. Before the EIGEN TGE, LRT tokens could leverage EigenLayer's popularity and expectations to maintain their valuations, but post-launch, they need to find their own paths.

Some ETH LRT projects have experimented with various methods and cases to maintain their popularity and "extend their lifespan":

- Multi-season airdrops from leading restaking projects to prolong lifecycle, such as EigenLayer's three-quarter airdrop to sustain interest.

- Seeking refuge in other restaking projects like Symbiotic and Karak. For example, Stakestone's STONE can be deposited in both EigenLayer and Symbiotic, while Ether Fi offers users the choice of EigenLayer, Symbiotic, or Karak treasury to earn points.

- Empowering LRT protocol tokens through collaboration with restaking protocols to enhance utility, such as Ether Fi's platform token ETHFI being used for staking in Symbiotic and Karak, while EigenLayer allows staking of the Renzo platform token REZ.

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