Competition in the BTC stake market heats up, as wrapped BTC fights for WBTC market share

With the launch of the first phase of the Babylon mainnet and the Pendle going live with BTC LST, the market's attention on BTCFi has once again increased. This article will explore the latest developments in BTC (re) staking and the field of BTC pegged assets.

BTC (Re) staking market overview

The competition for BTC LST is becoming increasingly fierce, with various parties vying for entry into the staking yield of BTC and its wrapped assets. Over the past 30 days, Lombard Finance has achieved rapid growth, reaching the current highest TVL with a deposit amount of 5.9k BTC, surpassing the Solv Protocol, which had long been in the lead.

Lombard has established a strategic partnership with the top re-staking protocol Symbiotic, providing participants with a richer source of re-staking returns and DeFi participation opportunities from the ETH ecosystem, thereby gaining a competitive advantage in the current stage.

The Importance of Ecological Strategy

In the BTC LST field, ecological strategy has become a key factor in the current competitive landscape. Unlike ETH LRT, which benefits from a mature DeFi ecosystem, BTC LST faces more complex considerations, including downstream DeFi application scenarios, the development stage of BTC L2, the combination with various on-chain BTC pegged assets, and integration with restaking platforms.

The strategic choices of each BTC LST provider influence their growth rate and the competition for early market share:

1. Lombard Finance focuses on the development of the ETH ecosystem, providing rich external rewards for stakers through partnerships with Symbiotic and Karak Network. At the same time, it actively promotes leveraged strategies for $LBTC on ETH in collaboration with Pendle, Gearbox Protocol, and others.

2. Solv Protocol and Bedrock are actively expanding across multiple chains, covering upstream deposit reception and downstream application construction. The main liquidity of SolvBTC.BBN and uniBTC is concentrated on the BNB and ETH chains, while also injecting BTC liquidity into other L2.

3. Lorenzo Protocol and pStake Finance focused on building the BNB chain in the initial stage, supporting the receipt of $BTCB deposits, and respectively minted LST - $stBTC and $yBTC on the BNB chain.

Pendle Enters BTCFi

Pendle has integrated four types of BTC LST ($LBTC, $eBTC, $uniBTC, and $SolvBTC.BBN) into its points market. The actual adoption of $LBTC on Pendle is higher than the surface value, as 37% of $eBTC is backed by $LBTC, and Pendle's integration of $eBTC also indirectly benefits Lombard.

Apart from $eBTC, the other three LSTs have collaborated with Corn. Corn is an emerging ETH L2 with unique designs of veTokenomics and Hybrid Tokenized Bitcoin. The future integration path could be: Wrap BTC → BTC LST → BTCN → DeFi, which adds another layer of nested leverage to the BTCFi system.

SatLayer Joins the BTC Re-staking Market

SatLayer, as a new entrant in the BTC staking field, has become a competitor to Pell Network. Both accept BTC LST staking and use it to provide security for other protocols. Pell has accumulated a TVL of $270 million, integrating major BTC derivatives across 13 networks. SatLayer is rapidly expanding in the market after recently securing funding.

Competition in the BTC Wrapped Token Market Intensifies

Since Justin Sun's involvement in WBTC custody has caused a stir, the competition in the wrapped BTC market has intensified. Major competing alternative assets include Binance's $BTCB, Merlin's $mBTC, Threshold Network's $tBTC, and Mantle's $FBTC.

Coinbase has launched the custodial-supported wrapped asset $cbBTC, with a current supply of 2.7k. $cbBTC is deployed on the Base and Ethereum networks, has gained support from multiple mainstream DeFi protocols, and plans to expand to more chains in the future.

Despite security concerns, $WBTC still holds over 60% of the wrapped BTC market. BitGo recently announced that it will deploy $WBTC on Avalanche and BNB chains, aiming to consolidate its market position through LayerZero's omnichain fungible token (OFT) standard, leveraging multichain scalability.

$FBTC has been deployed on Ethereum, Mantle, and BNB chains, actively promoting wider adoption in the BTCFi space through the "Sparkle Campaign".

Summary

In the ongoing growth trend of BTCFi, BTC (re) staking and BTC pegged assets are two key sectors worth continuous attention. The BTC (re) staking sector has shown signs of excessive construction on the supply side, while the market size on the demand side remains unknown. The trend of various BTC pegged assets being interwoven introduces new systemic risks.

For various BTC-backed assets, trust remains a key issue. Exchanges, L2s, and BTC LST parties are actively developing their respective BTC-backed assets through different solutions, aiming to be accepted by mainstream DeFi protocols and a wide range of users, thus quickly capturing the market lost by WBTC.