🟣 Navigating the stBTC maze
Bridge momentum and a fresh vault product
Macauley Peterson
September 19, 2024
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Welcome back to 0xResearch. Here's what we’ve got for you today:
Bitcoin DeFi: Staked bitcoin
Chart: Hyperlane growth
Degen: Coinbase’s cbBTC gets a vault
CT: Gary G and the Rari boys
The FOMC cut short-term interest rates by 0.5% yesterday, more than I had expected two weeks ago. The odds were roughly split between a 25bps and 50bps cut heading into the meeting.
Fed Chair Jerome Powell did his darnedest to pitch the decision as "a good strong start" showing confidence that inflation is, and will continue to, come down.
Bitcoin has reacted well to the news so far, up about 4.5% since the end of Powell’s press conference.
Liquid staked bitcoin
Several players are providing liquid staked wrappers for bitcoin, and at least three of them are using "stBTC" for their ticker. This could cause confusion for users navigating the DeFi landscape, as each version has distinct functionalities and integrations.
Mezo, which we mentioned on Tuesday, styles itself as a "Bitcoin Layer-2 network" in the economic alignment sense. Its focus lies in expanding Bitcoin's integration into Ethereum DeFi. Its version of stBTC is minted against wrapped bitcoin (WBTC) or Threshold’s tBTC, and is primarily aimed at bringing more bitcoin liquidity into Ethereum.
Lorenzo Protocol's stBTC, on the other hand, operates on the Babylon protocol, through which bitcoin holders stake their native bitcoin and receive stBTC, split into Liquid Principal Tokens (LPT) and Yield Accumulation Tokens (YAT).
Nomic also took the name stBTC back in April, for its liquid staked bitcoin token with Babylon-derived yield. Nomic’s LST can be used in the Cosmos ecosystem and is transferable via IBC, so users can participate in DeFi activities across IBC-compatible chains while still earning yield from their staked bitcoin. This implementation is part of Nomic's effort to bridge bitcoin liquidity into the Interchain. It also has a native LST, nBTC, and governance token, NOM.
Going for a more distinct ticker is Lombard, which launched LBTC at the end of August. Like Lorenzo’s offering, LBTC results from users depositing bitcoin, which is then staked through the Babylon protocol to generate yield. LBTC is the yield-bearing representation that can be used across multiple blockchains.
The protocol attracted over $165 million in deposits from institutional investors and a large waitlist of retail users during its private beta phase. Lombard also provides integrations with major DeFi protocols such as Symbiotic, Morpho and Pendle. It has also collaborated with Cubist, a key management infrastructure company, to implement security measures including hardware-enforced key management workflows.
The proliferation of various options for staking native bitcoin is likely to confound the average consumer, according to Jeroen Develter, COO of Persistence.
"I don't think people really understand enough about it, and in a way, it's going to be harder and harder for them to understand every single security implication of all these forms of bitcoin," Develter told Blockworks. "I feel the market will kind of price it or should price it accordingly."
By the way, Persistence offers its own avenue into bitcoin staking with Babylon.
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lpETH invites you to the on-chain Pool Party!
Built by Tenderize Labs, lpETH is an on-chain clearinghouse that reinvents liquidity for (re)staked ETH. Users can instantly unstake ETH and anyone can deposit ETH as liquidity to earn yield collected from swap fees, token bribes and lpETH native incentives. Pre-launch deposits are open for another 21 days, be sure to sign up through Turtle Club before depositing ETH to claim a 66% boost in incentives and a referral code.
LayerZero vs. Hyperlane daily transactions:
LayerZero’s transaction volume has fallen sharply from nearly 200k daily (prior to its May 1, 2024 not-quite-an-airdrop snapshot date) to around 5000 these days.
Evidently, bridgooors farming future tokens migrated elsewhere. Hyperlane, whose v3 daily transaction volume is shown in orange above — adjusted to match LayerZero’s scale — is one of the beneficiaries. The network, which has collected about $2.35 million in fees by facilitating $2.84 billion in total bridging volume, announced today that it will add Solana and Eclipse to its stable of 50+ connected chains.
Eclipse helped Hyperlane with its SVM deployment and will be among the first beneficiaries, although Hyperlane will allow permissionless and open source connections to other Solana Virtual Machine (SVM) chains, such as Atlas.
— Macauley Peterson
Veda, a project described as "the first native yield layer for DeFi" is simplifying access to new bitcoin yield sources using the Coinbase-custodied cbBTC.
A new vault, in collaboration with Instadapp, allows users one-click access to a variety of bitcoin-related DeFi opportunities across Ethereum and Base. The cbBTC vault integrates with top DeFi protocols like Uniswap, Aave and Moonwell, and includes emerging Bitcoin strategies such as liquid restaking.
Veda’s omnichain approach enables users to seamlessly interact with multiple blockchains throughout a single experience. This makes it easier to access DeFi yields and products traditionally siloed by blockchain boundaries. Veda has over $1 billion in TVL and a rapidly growing user base of more than 40,000, according to the team. Sunand Raghupathi is a co-founder of both Veda and Seven Seas Capital, which curates risk on the vault product.
Though accessible on both Veda and Instadapp platforms, the cbBTC vault is not however available to US users.
Instadapp, launched in 2019, is a DeFi platform designed to simplify and optimize the management of DeFi assets. Initially built on Ethereum, it serves as an aggregator that integrates multiple DeFi protocols like MakerDAO, Aave and Compound, and allows users to manage their positions across different platforms from a single interface.
Veda also integrates with protocols like Ether.Fi and Lombard.
— Macauley Peterson
SKALE is a network of EVM-compatible chains with pooled security. SKALE stands out by offering a gas-free blockchain experience for end-users. It is able to do this by shifting validator compensation to developers. This business model has allowed SKALE to find traction in the gaming sector, demonstrated by the activity in the Nebula and Calypso hubs. As the network matures, SKALE chain growth will be a key metric to follow as the network’s economic sustainability depends on new chains joining the network and paying their monthly subscription fee.
Despite ORCA being down ~70% YTD, Orca's fundamentals remain strong, with several tailwinds further strengthening its near- and long-term outlook. Orca is ~2x more capital efficient than Raydium, and its market share has almost doubled since it bottomed in June. With the launch of Splash Pools, Orca is now looking to capture a portion of Raydium's memecoin volume, while remaining king on DeFi-related tokens such as stablecoins and LSTs. Finally, as the SVM proliferates beyond Solana, Orca is in a solid financial position to quickly expand to new SVM chains like Mantis and Eclipse.
0xResearch readers and listeners are asking a crucial question: What lies ahead for the Cosmos ecosystem?
At Permissionless, hear from leading voices in Cosmos on the future of the network.
Plus, the stablecoin market has some new entrants.
The SEC claimed Rari operated in unregistered broker activities and "misleadingly" claimed investors would receive a higher annual yield.
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.
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