Below is guest posting and analysis by Vincent Maliepaard, Marketing Director at Sentora.
Bitcoin’s market capitalization has recently surpassed $2 trillion, and with over 50 million Bitcoin addresses balanced, the value of the assets is no longer denied. However, if traditional currencies such as the dollar or euro pay interest on their usual holdings, Bitcoin simply does not provide such a reward for holding assets. However, recently two different pathways have appeared to change the picture:
- Native Bitcoin “Staking” – Lock BTC and earn fees with Babylon Protocol.
- Liquid Staking Token (LSTS) – Mint Trading Receipts like: LBTC This will keep your staking rewards flowing while restoring liquidity.
These two solutions provide a viable route to achieving stable yields with Bitcoin. Let’s dive into what this entails and how it works.
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Babylon performed live on the mainnet in late 2024, allowing BTC holders to have time-zone coins on the Bitcoin chain, and delegating them to what is called delegation Network measured by Bitcoin. The network pays with BTC, About 1-2% yield the current.
The idea was immediately understood: Babylon reports more $4 billion in BTC It has become absorbed in the protocol Since last year.
Important features
- There are no wrapping or bridges: BTC will never leave the native chain.
- Key risks: A protocol bug or “thrashing” if the delegated verification device cheates.
- Disadvantages: The stained coin remains motionless until the unstable timer expires.
Liquid stake: LBTC returns mobility to menu
Lockup is a breakthrough for many traders. A liquid staking token corrects it by issuing transferable assets representing the underlying stock and its future rewards.
Examples of such liquid staking tokens for Bitcoin are Lombard Finance’s LBTC
- 1:1 Mint: Bet BTC through Lombard’s Babylon contract and receive LBTC on the EVM chain. (Lombard))
- 7-day exit: Burn LBTC and trigger the same Unbond period as native Babylon staking; Approximately 1 week. Nevertheless, users can easily terminate LBTC by trading on DEXS.
- True fluidity: Daily on-chain volume is above average 200 million dollarsand liquidity is large enough to drive trading up to $30 million without significant slippage. Most portfolio sized exits are sufficient.
- Duty Tradeoffs: Holders should trust Lombard Mint and Volcano Smart Contract and Babylon Variator Set.
LBTC inherits basic staking rewards, but its true superpower is capital efficiency. Users can post LBTC as collateral, spin into the Defi pool, or sell on Dex while the original BTC continues to work.
Extrude yield curve
This sounds appealing, but getting a notable return on Bitcoin LST is complicated. As a retail user, you need to understand the complex dynamics of Defi related to the risks and returns of various protocols and strategies.
Even if you understand these factors in essence, users often fluctuate depending on the market, so you need to proactively manage your position. In other words, to maintain a notable APY, users must switch strategies from time to time or take action to maintain their position profitable.
Luckily there are other options. Lombard offers a variety of safes aimed at simplifying this process and making Bitcoin yields as easy as possible. Let’s take a look at the recently released vault. Sentora Defi Vault.
It was born from the merger of Sentora, Trident’s Digital and Intotheblock. It’s started BTC IVELD VAULT Recently at Lombard. This product accepts either WBTC or LBTC and targets ~6% APY.
How does it earn a spread?
Vault automatically implements several different strategies with different capabilities, depending on the market situation. All this is automated and does not require manual actions from the user or the vault manager. These strategies include:
- Excessive loans – Lending assets from BTC to lending markets like Aave.
- Pendle Yield Trading – Sell future yield streams in split and sell additional front load returns.
- Delta neutral borrowing – Borrow other assets such as Stablecoins to deploy them into a delta-neutral, high-yield strategy
All of these strategies are plugged into real-time on Sentora Defi Risk EngineThe same data agency is used to monitor risk exposure across Defi. Positions floating beyond the preset limit will be automatically re-adjusted.
Risk Reward Snapshot
- Native Staking: Tight risk surface, moderate returns. Perfect for cold storage purists who can withstand lockups.
- Only LBTC: The same base yield, but the token remains liquid at the expense of exposure to the smart contract and bridge. Users can amplify yields by interacting with the Defi protocol.
- Vault Tips: Multiple debt venues are involved, but broader risks are mitigated by automated risk management and hedging.
What to see next
Holding Bitcoin can ultimately pay off beyond the price valuation. With a variety of options available for different needs and risk appetites, Bitcoin holders can ultimately benefit from DEFI advancements. Additionally, with the recent increase in LBTC volume, it is possible for large in-house trading desks to utilize these strategies, further driving innovation in the Bitcoin staking area.