Vincent Maliepaard, Marketing Director at Sentora, recently shared an in-depth analysis on the growing trend of earning yields on Bitcoin through staking and liquid-staking tokens (LSTs). With the Bitcoin market cap surpassing $2 trillion and over 50 million Bitcoin addresses holding a balance, the value of this digital asset is undeniable. However, unlike traditional currencies that offer interest on holdings, Bitcoin does not provide such rewards for simply holding the asset.
To address this, two innovative pathways have emerged:
- Native Bitcoin Staking: This involves locking BTC in the Babylon protocol and earning fees by delegating coins to Bitcoin-Secured Networks. The current yield ranges from 1-2%, with Babylon reporting over $4 billion in staked BTC since its launch in late 2024. The main features include no wrapping or bridges, immobile staked coins until the unbonding timer expires, and potential risks like protocol bugs or slashing.
- Liquid Staking Tokens (LSTs): LBTC from Lombard Finance is an example of a liquid-staking token for Bitcoin. Users can stake BTC through Lombard’s Babylon contracts and receive LBTC on an EVM chain. LBTC offers real liquidity, with daily on-chain volume averaging over $200 million. Users can easily exit LBTC by trading it on DEXs, allowing for capital efficiency as the original BTC remains staked.
While the idea of earning yields on Bitcoin is enticing, it can be complex for retail users to navigate the DeFi landscape to maximize returns. Lombard’s Sentora DeFi vault simplifies this process by automatically executing various strategies based on market conditions, targeting an APY of around 6%. Strategies include over-collateralized lending, Pendle yield trading, and delta-neutral borrows, all monitored by Sentora’s real-time DeFi risk engine.
In terms of risk-reward snapshots, native staking offers a modest return with tight risks, LBTC provides liquidity but exposes users to smart contract and bridge risks, while the Sentora Vault involves multiple DeFi venues with automated risk management and hedges.
The increasing volume of LBTC and the potential for institutional trading desks to utilize these strategies indicate further innovation in the Bitcoin staking space. Holding Bitcoin can now offer more than just price appreciation, with different options available to suit varying needs and risk appetites in the evolving DeFi landscape.