While we were still worried about the centralization of WBTC, BTC’s liquidity re-staking has arrived.
eBTC not only solves the centralization problem of BTC but also allows BTC to generate staking and re-staking rewards while achieving remote staking.
Note that this eBTC is the re-staked version of BTC from ether.fi.
It is not to be confused with the eBTC from ebtc.finance below. The latter is merely a synthetic asset based on stETH, with the underlying asset still being ETH, synthesized through over-collateralization. Unlike the eBTC mentioned above, this red eBTC’s benefits still come from ETH staking and re-staking rewards.
You might be wondering, what is the source of ether.fi’s eBTC rewards?
There are two sources: one is the staking rewards from Bitcoin, and the other is the re-staking rewards from Bitcoin.
BTC’s re-staking rewards, similar to ETH’s re-staking rewards, come from Eigenlayer’s AVS service. If you're unclear, please check out this article titled “Demystifying Re-Staking.”
Today, the focus is on BTC staking rewards. The Babylon project makes all of this possible. I will detail how to stake BTC, re-stake, and leverage stake and re-stake shortly.
To understand the “why,” you first need to understand the Babylon project and how it differs from Eigenlayer.
1. Similarities and Differences Between Babylon and Eigenlayer
Let’s start with the similarities—both projects are backed by academic scholars.
1.1 They Are Both Professor Coins
EigenLayer was founded by former University of Washington associate professor Sreeram Kannan. Kannan closely collaborated with David Tse (founder of Babylon) during his postdoctoral research at UC Berkeley and Stanford.
Babylon, co-founded by Stanford engineering professor David Tse, aims to use Bitcoin as a staking asset to enhance the security of other blockchains.
Babylon adopts a method similar to EigenLayer but focuses more on Bitcoin. Both projects enhance blockchain security through staking mechanisms and provide rewards to users, yet they differ significantly in technical architecture, sources of rewards, and supported application scenarios.
1.2 Babylon’s Innovations
Babylon is like giving a key to the dormant Bitcoin, allowing it to participate in PoS chain staking and earn rewards.
Babylon is an innovative project that introduces staking mechanisms for Bitcoin, enabling the integration of Bitcoin with proof-of-stake (PoS) chains through remote staking. Traditionally, Bitcoin, as an asset in a proof-of-work (PoW) system, lacks staking functionality and cannot offer users staking rewards like Ethereum (ETH). Babylon breaks this limitation, allowing Bitcoin holders to stake BTC to provide economic security for PoS chains and earn staking rewards. This is a significant innovation in Bitcoin staking, particularly in avoiding cross-chain bridge security risks, as it does not require transferring Bitcoin to PoS chains via traditional cross-chain methods.
1.3 Limitations of Babylon
Although Babylon innovatively introduces Bitcoin staking, it faces some technical limitations. Firstly, Bitcoin uses a UTXO model, lacking Ethereum-like native smart contract functionality. This means that Babylon can only offer static capital security, unable to support services like oracles, cross-chain bridges, or data availability layers that require complex on-chain logic and real-time interactions. While Babylon’s staking mechanism can enhance PoS chain security through timestamping and a trustworthy slashing mechanism, it lacks the capability to handle dynamic data verification and cross-chain asset management, resulting in relatively limited application scenarios.
1.4 Summary
There is some overlap between the target audiences of Babylon and Eigenlayer, as both can provide security for PoS chains.
Comparatively, Babylon has a nominal advantage when serving PoS chains, as Bitcoin’s reputation is clearly greater than that of Ethereum. However, Eigenlayer has a broader scope and can offer more AVS services, such as oracles, cross-chain bridges, and data availability layers.
Thus, while Babylon and Eigenlayer have some competition, collaboration is more prevalent, especially in the re-staking domain.
2. From LBTC to eBTC
The liquidity staking (LBTC) and re-staking (eBTC) of Bitcoin are leading the crypto world into a new era.
In this process, BTC is no longer just traditional "digital gold"; it now has more liquidity and utility. Through liquidity staking and re-staking, Bitcoin can enjoy the benefits of both worlds: it can serve as a highly secure store of value and participate in staking across different blockchains to earn rewards.
Thanks to Ethereum’s innovation in re-staking, Bitcoin’s re-staking seems to have materialized overnight.
2.1 Liquidity Staking: The Birth of LBTC
LBTC is a liquidity staking token for Bitcoin on smart contract platforms like Ethereum, similar to stETH after Ethereum staking. In other words, when users stake BTC, they receive an equivalent amount of LBTC, which can be traded and used in other DeFi applications just like the original BTC. This brings unprecedented flexibility to Bitcoin holders: they can earn staking rewards without giving up BTC's liquidity.
With LBTC, Bitcoin is no longer a static asset but can flow flexibly like water in the DeFi world.
Due to Ethereum's rich DeFi protocol ecosystem, such as lending, liquidity mining, and yield aggregators, BTC holders can participate in these protocols through LBTC, earning more rewards. This approach not only preserves Bitcoin's security features but also enhances its utility.
Thus, the Bitcoin that continuously generates rewards—LBTC—has been born. Look at the asset innovation brought by stETH, and you'll understand how vast LBTC's future could be.
2.2 Re-Staking: The Innovation of eBTC
Thanks to Ethereum's re-staking innovation, Bitcoin’s liquidity re-staking seems to have happened overnight. The eBTC from ether.fi is theoretically built on LBTC, but for user experience, you can stake WBTC directly on the Ethereum blockchain to receive eBTC. This method has already been applied to Ethereum's liquidity re-staking: users don’t need to own staked ETH (like stETH) but can participate in re-staking directly with ETH, enjoying both staking and re-staking rewards in one go.
The principle behind this is similar to Eigenlayer’s ETH re-staking. This means that re-stakers not only receive the original BTC staking rewards but also gain additional re-staking rewards from the security services provided by Eigenlayer. This dual reward model maximizes potential returns for stakers.
2.3 Application Scenarios for LBTC and eBTC
The core value of liquidity staking and re-staking lies in providing Bitcoin holders with more opportunities to make their previously locked capital more active. In liquidity staking, staking BTC no longer means locking up assets; users can continue to operate within the DeFi ecosystem, such as using LBTC as collateral for loans or providing liquidity to earn fees. Here, you can discover 20 ways to earn with LBTC.
Currently, ether.fi also offers 4 ways to earn with eBTC.
2.4 Summary
As the technology of Bitcoin liquidity staking and re-staking matures, future Bitcoin holders will not solely rely on price appreciation for wealth growth. They can obtain a continuous stream of rewards through various protocols and services while retaining their Bitcoin holdings via staking and re-staking mechanisms.
In the future, we can expect to witness the emergence of more multi-chain Bitcoin liquidity derivatives, such as cross-chain compatible staking tokens and more platforms supporting re-staking services, enriching the Bitcoin ecosystem. This will transform Bitcoin from a “passive holding” asset into an “actively appreciating” asset.
3. How to Participate in BTC Staking and Re-Staking
3.1 BTC Staking (LBTC)
This applies only to scenarios where you have Bitcoin on the Bitcoin blockchain.
Click the link to enter the page below.
After connecting your wallet, confirm the target address for LBTC as shown in the image below.
Once confirmed, you will proceed to the next step, where you can choose how to stake BTC; it’s recommended to select direct staking on the left.
Click the copy button at the arrow position in the image above, and send BTC to that address through your Bitcoin wallet or centralized exchange. After staking, it’s advisable to complete the re-staking below. Currently, ether.fi has more related protocols airdropping, and re-staking can further amplify your airdrop rewards.
3.2 BTC Re-Staking (eBTC)
There are two ways to achieve BTC re-staking: one is the traditional re-staking on ether.fi, and the other is providing liquidity on the curvefi website.
3.2.1 Re-Staking on ether.fi
If you have WBTC on Ethereum, or if you already have LBTC, click to connect and enter the page below.
After connecting your wallet, select WBTC or LBTC and click the Deposit button below.
3.2.2 Providing Liquidity on curvefi
Click the link to enter the page below.
Notice the arrow position in the image above; you will find that there is relatively little WBTC in the eBTC-WBTC pool, so you only need to deposit WBTC to receive extra rewards. Keeping eBTC at 0 while inputting 1 WBTC will yield 0.0265% in rewards.
Don’t worry about whether ether.fi recognizes this re-staking, as this is also advocated by ether.fi, and staking here will earn you 4x points, as shown in the image below.
3.3 BTC Leveraged Staking/Re-Staking
If, like me, you’re optimistic about the future returns from BTC staking and re-staking—mainly various airdrops—you can leverage Pendle to stake and re-stake significantly.
However, before leveraging LBTC and eBTC, it’s essential to understand the underlying principles.
3.3.1 Leveraging with Pendle
Leverage is achieved through Pendle's mechanism of separating principal and yield, allowing you to purchase yield tokens (YT). For example, I bought YT as shown in the image below.
I purchased 0.061 YT for LBTC and 0.069 YT for eBTC, each costing around 100 USD. If you don’t buy YT and want to stake LBTC or eBTC directly, how much BTC would you need to stake?
For LBTC, I would need to stake approximately 0.216 LBTC to receive 0.06057 YT, as shown in the image. The value of 0.216 LBTC is about 13,426.37 USD, meaning I spent 100 USD to borrow 0.216 LBTC for 97 days, gaining rights to various airdrop points—this results in over a hundred times leverage.
Now, looking at eBTC, to obtain 0.069 YT, I need to stake 0.173 eBTC, as shown in the image.
This means I spent 100 USD to purchase rights to earn various airdrop points from eBTC over the next 97 days, achieving similar leverage exceeding 100 times.
My risk is that if the total airdrop earnings don’t reach 200 USD, I will incur a loss. Fortunately, I only invested 200 USD, limiting my loss.
Keep in mind that after 97 days, on December 25, 2024, your YT will be worthless, while all previous airdrop points will have been distributed to the wallet holding the YT.
With an understanding of Pendle's leveraging principles, if you’re interested in trying it out, keep reading!
3.3.2 Leveraged Staking (LBTC)
After clicking the link to connect your wallet, you'll enter the following page.
First, let's see how to leverage LBTC. Click on the YT LBTC on the left side, as shown in the image below.
In the new page, the process is similar to a regular swap. Find the token you want to pay with; I directly used ETH to reduce steps and save on gas fees, as shown in the image.
After clicking the Swap button, a new page will pop up—just click Swap again.
Finally, you'll need to sign with your wallet. You’ll notice it costs 0.002566 ETH in gas fees, which is relatively high.
3.3.3 Leveraged Re-Staking (eBTC)
Similarly, find YT eBTC and click on the Purchase YT eBTC option.
Continue using ETH for the purchase. Click Swap, then sign with your wallet.
3.3.4 Confirming Airdrop Points
Click on the Dashboard menu → YT tab to see the types and amounts of YT you just purchased. You can sell your YT through Points Markets anytime before its value drops to 0, which is before December 26, 2024.
About 24 hours later, by clicking the link, you can find that the airdrop points related to LBTC have started distributing. This site requires an invitation for the points to activate; here’s a one-time invite code: pr3e-hg8d k747-3jae 5ffj-c95p.
Click the link to check the LBTC points; in less than two days, it has accumulated 358.69 points.
Now, let's take a look at the re-staking points for eBTC. Click the link, connect your wallet, and enter the page shown below. You can see that the eBTC Loyalty PTS is now at 100.26K.
Conclusion
Thanks to the modular design of blockchain, the re-staking mechanism for BTC (from LBTC to eBTC) has been nearly realized overnight. This same concept has also been applied to the leveraged re-staking of BTC, as ETH's leveraged re-staking was implemented earlier. This innovation is like introducing a new YT product on the Pendle platform—the core mechanism hasn’t changed; it’s simply been applied to Bitcoin.
This modular approach not only enhances the flexibility of decentralized finance (DeFi) but also allows complex financial instruments to be assembled like building blocks, driving rapid development and expansion of the entire blockchain ecosystem.
Each innovation in blockchain opens a new door, giving more assets the same opportunities. Of course, besides modularity, the role of tokenization is also significant, which we can discuss another day.
About Airdrop Reference
Airdrop Reference is an innovative blockchain education and promotion platform aimed at spreading basic blockchain knowledge and helping ordinary users understand and participate in the development of blockchain technology. The mission of this project is to lower the entry barriers to blockchain, promote high-quality blockchain projects, and allow more people to enjoy the benefits of the Web3.0 era.
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