Bitcoin Liquid Staking Arrives on Stacks
Bitcoin, traditionally seen as a store of value, is now entering the world of decentralized finance (DeFi) with the introduction of liquid staking on the Stacks platform. Zest Protocol, a service within the Bitcoin DeFi ecosystem, has announced the launch of BTCz, a new kind of Bitcoin equivalent that allows holders to earn yield. This is achieved through the Babylon staking system.
What is Liquid Staking?
To put it simply, liquid staking allows Bitcoin holders to stake their coins and earn rewards while still retaining the ability to trade these staked assets. Imagine having a chicken that lays eggs; with liquid staking, you can sell the eggs without selling the chicken. This is a concept previously popularized by Ethereum with its own liquid staking tokens.
How does BTCz Work?
According to Tycho Onnasch, co-founder of Zest Protocol, users deposit Bitcoin and receive BTCz tokens in return. Over time, BTCz appreciates in value against Bitcoin because it accrues additional Bitcoin through the staking process. It's like depositing money in a savings account that grows with interest.
Enhancing Security with Stacks
Stacks, a layer-2 network for Bitcoin, plays a crucial role in securing BTCz. Thanks to the ability of Stacks smart contracts to read Bitcoin's state, the validity of staking balances can be verified independently, without the need for third-party services. This ensures a higher level of security and trust for BTCz holders.
The Future with sBTC
Stacks is also planning to introduce sBTC, a decentralized version of Bitcoin that is secured by users who "stack" their STX tokens. BTCz is anticipated to complement sBTC by providing a yield-bearing option within the Stacks ecosystem.
The Impact on DeFi
The launch of BTCz and the upcoming sBTC signify significant strides towards increasing Bitcoin's utility in the DeFi space. As noted by David Tse, Babylon's co-founder, liquid staking has already gained traction in the Ethereum ecosystem, and similar growth is expected for Bitcoin.
Current Status
Zest Protocol's lending platform currently has a total value locked (TVL) of $25.46 million, according to DeFi Llama. This is a promising beginning as Bitcoin starts to tap into the potential of decentralized finance.
This innovative use of Bitcoin staking on Stacks could pave the way for more applications and increased adoption in the cryptocurrency markets.
