Bitcoin derivatives hit Starknet and Sui
LBTC and sBTC integrations unlock new DeFi yields for BTC holders
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New forms of bitcoin liquidity are finding their way into emerging blockchain ecosystems, with recent integrations of Lombard’s LBTC and Stacks’ sBTC expanding opportunities for BTC holders in cross-chain DeFi.
On Starknet, a new partnership between the Starknet Foundation and Lombard Protocol will introduce LBTC, a fully bitcoin-backed liquidity token. LBTC maintains a 1:1 backing by native BTC reserves, which is bridged into Starknet DeFi.
Lombard, a protocol built on top of Babylon, receives BTC deposits, stakes them via Babylon and issues LBTC as a liquid representation of staked BTC. LBTC is intended to be multichain: available on Ethereum, Arbitrum, Sui, Genesis (Babylon) and others.
Led by Starkware CEO Eli Ben-Sasson, Starknet has positioned itself as a performant execution layer for Bitcoin, in addition to Ethereum. “Moves like this invigorate a whole new class of builders and users — people who want the credibility of Bitcoin and the creativity of DeFi,” he said.
The phased rollout of LBTC will initially focus on bridging and liquidity provisioning, followed by the introduction of staking options in Lombard-powered vaults. These vaults will enable LBTC holders to generate yield without surrendering custody of their underlying bitcoin.
While Babylon’s BTC staking is trust-minimized, LBTC introduces additional trust assumptions tied to how Lombard mints and manages tokens and bridges, according to Cubist co-founder Riad Wahby. Cubist provides threshold signature tooling for Lombard and other Babylon ecosystem participants.
Having said that, Wahby added, “I feel more comfortable with LBTC, but that’s because we know a lot about their security.”
Meanwhile, Sui is preparing to integrate sBTC, the bitcoin-backed token native to the Stacks ecosystem.
The token uses a threshold-signature multisig secured by a set of 15 reputable institutional signers, with plans to gradually decentralize by integrating directly into Stacks’ consensus mechanism.
The expansion will enable new opportunities for lending, borrowing and trading without compromising Bitcoin’s decentralization, according to Stacks founder Muneeb Ali.
Bypassing centralized custodians, “sBTC will be bridged to Sui via a trust-minimized, non-custodial process that preserves Bitcoin’s native security,” Ali told Blockworks.
“This collaboration lets us bring bitcoin to where the people are, and introduce more users to the growing bitcoin economy,” he said. Holders of sBTC on Sui will benefit from dual-yield opportunities: a base ~5% BTC reward merely for minting and holding sBTC, plus additional incentives from deploying the asset in Sui DeFi protocols.
The decision to integrate sBTC positions Sui as a new alternative hub for institutional BTCfi use cases — the network is already capturing significant bitcoin liquidity, with over 10% of Sui’s total TVL now originating from Bitcoin-derived assets, according to the Sui Foundation.
Both integrations signal a growing trend toward major L1s and L2s actively competing to onboard BTC liquidity to enrich their homegrown DeFi offerings. They are part of a trend shifting away from bitcoin derivatives relying on centralized custodians in cross-chain deployments. This should appeal to a subset of bitcoin holders who want to maintain self-custody while reaching for yield.
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