The competition landscape between BTC staking and wrapped assets is heating up

Recently, with the launch of the first phase of the Babylon mainnet, Pendle's support for BTC LST, and the introduction of various BTC wrapped assets, market attention on BTCFi has once again increased. This article will explore the latest developments in this field from two perspectives: BTC (re) staking and BTC anchored assets.

BTC (Re) staking market competition heating up

After rapidly reaching the 1000 BTC cap in Babylon Stage 1, competition between BTC LSTs has become increasingly fierce. In the past 30 days, Lombard Finance has leaped to the top of the TVL rankings with a deposit amount of 5.9k BTC, surpassing the long-time leader Solv Protocol. Lombard has gained a competitive edge by establishing a strategic partnership with the top re-staking protocol Symbiotic, providing users with richer ETH ecosystem re-staking yields and DeFi participation opportunities.

Currently, ecological strategy has become a key factor in the competitive landscape of BTC LST. Compared to ETH LRT, BTC LST faces more complex considerations, including downstream DeFi application scenarios, the development stage of BTC L2, the combination with various chain BTC pegged assets, and integration with re-staking platforms. The strategic choices of each BTC LST provider will directly affect their growth rate and early market share.

Lombard Finance is currently focused on the development of the ETH ecosystem. Through partnerships with Symbiotic and Karak Network, Lombard provides rich external rewards for stakers. LBTC, as the first BTC LST supported by the ETH re-staking protocol, is actively promoting leveraged strategies on ETH, with key partners including Pendle, Gearbox Protocol, and Zerolend. As Ether.Fi receives LBTC deposits, LBTC will benefit from all eBTC-related downstream applications in the future.

In contrast, Solv Protocol and Bedrock DeFi adopt a multi-chain expansion strategy while developing upstream deposit reception and downstream application construction. The main liquidity of SolvBTC.BBN and uniBTC is concentrated on the BNB and ETH chains, while also injecting BTC liquidity into other L2s. What makes Solv unique is the requirement for users to deposit SolvBTC to convert it into SolvBTC.BBN to participate in Babylon, which will drive market demand for SolvBTC.

Lorenzo Protocol and pStake Finance will focus on building on the BNB chain in the initial stage, supporting BTCB deposits and minting stBTC and yBTC on the BNB chain. Lorenzo's feature lies in the construction of a yield market based on BTCFi, adopting a structure that separates Liquid Principal Tokens (LPT) and Yield Accumulation Tokens (YAT), making BTC restaking yield strategies more flexible.

Pendle Enters the BTCFi Field

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

Apart from eBTC, the other three LSTs have all collaborated with Corn. Corn is an emerging ETH L2 that features unique designs such as veTokenomics and Hybrid Tokenized Bitcoin. In the future, there may be an integrated path of Wrap BTC → BTC LST → BTCN → DeFi, which adds new nested leverage to the BTCFi system but also introduces new systemic risks.

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

SatLayer Joins the BTC Staking Market

SatLayer has entered the BTC staking field, becoming a new competitor to Pell Network. Both accept BTC LST staking and use it to provide security for other protocols. As a pioneer, Pell has accumulated a TVL of $270 million and integrates major BTC derivatives across 13 networks. Following its recent funding announcement last month, SatLayer is also rapidly expanding its market.

SatLayer is currently deployed on Ethereum, supporting the reception of various BTC LSTs, and more integrations are expected. With the increase of homogeneous restaking platforms, the liquidity competition for BTC and its variant assets will become more intense. This provides participants with additional nested yield opportunities, but also shows signs of oversupply in the infrastructure of the restaking sector.

BTC Wrapped Token Market Landscape

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

Coinbase has launched the custodian-supported wrapped asset cbBTC, with a current supply of 2.7k. cbBTC is deployed on the Base and Ethereum networks, has received support from multiple mainstream DeFi protocols, and plans to expand to more chains. PumpBTC and Solv Protocol quickly expressed their intention to collaborate with Base, showcasing the development potential of cbBTC in BTCFi.

Despite security concerns, WBTC still holds over 60% of the wrapped BTC market. BitGo announced the deployment of WBTC on Avalanche and BNB chains and is attempting to solidify its market position through multi-chain expansion via LayerZero's cross-chain fungible token standard. However, the adoption rate of WBTC continues to decline, and as leading DeFi protocols like Aave and Sky Ecosystem begin to remove WBTC from their collateral lists, this trend may influence more protocols' attitudes toward WBTC.

FBTC has been deployed on Ethereum, Mantle, and BNB chains, actively promoting widespread adoption in the BTCFi space through the "Sparkle Campaign". In the BTC (re) staking sector, FBTC has been adopted by Solv, BedRock, PumpBTC, and Pell, providing early users with Sparks points incentives.

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

Summary

In the continuous growth trend of BTCFi, BTC (re) staking and BTC stable assets are two key areas worth ongoing attention. The BTC (re) staking sector is experiencing a trend of excessive construction and internal competition on the supply side, while the market size on the demand side remains unclear. Differentiated ecological strategies and unique downstream gameplay have become key factors in the competition among BTC LSTs. At the same time, the trend of interlocking BTC stable assets introduces new systemic risks, and various protocols also face the possibility of being over-mined with minimal returns.

For BTC-backed assets, trust remains a core issue. Exchanges, L2s, and BTC LST parties are actively developing their respective BTC-backed assets through various schemes, striving to be accepted by mainstream DeFi protocols and a wide range of users, in order to quickly capture the market share lost by WBTC.