Lorenzo Protocol Revolutionizes Bitcoin Staking

Bitcoin, the pioneer of cryptocurrencies, still reigns as the largest by market capitalization, but it is not without its limitations. These include a slow consensus mechanism, limited data capacity, and an absence of smart contract capabilities, which significantly restrict Bitcoin’s integration into the thriving decentralized finance (DeFi) sector.

Addressing these issues, Lorenzo Protocol has introduced a novel Bitcoin liquid restaking protocol. Liquid restaking, an advancement of the liquid staking model, allows investors to stake on proof-of-stake blockchains while maintaining liquidity. This new protocol enables users to stake the stBTC derivative token, representing their staked Bitcoin across multiple blockchains, thus earning additional yields.

“We are a platform to help stakeholders lend BTC liquidity to the projects needing them for scale, and then to provide the yield from these projects,” Matt Ye, founder of Lorenzo Protocol, explained. By tokenizing the lending and borrowing of BTC liquidity, Lorenzo effectively creates Bitcoin bonds.

The platform leverages the Lorenzo Appchain, a Bitcoin Layer 2 network compatible with Ethereum Virtual Machines (EVM) and secured by BabylonChain’s shared security. “This L2 is responsible for the issuance and settlement of staking tokens and building the DeFi ecosystem on top of these token standards,” Ye added.

The testnet for Lorenzo Protocol is set to launch soon, offering users a chance to try out its staking portal. “You can basically stake through us to Babylon, and we will issue stBTC on our L2s, which you can then bridge to other L2 or L1 ecosystems with our bridge,” Ye detailed.

As the Bitcoin DeFi ecosystem continues to evolve, Ye anticipates a surge in demand for Bitcoin liquidity across various applications, including L2 solutions, BTC yield products, and staking portfolio management. “Every L2 is one BTC yield source; trading desks and trading strategies are others,” he said.

Lorenzo also positions itself as a BTC bond trading protocol, facilitating the lending of funds globally. “Without a bond market or money market, your assets are very illiquid,” Ye explained. A BTC bond market would allow holders to maintain liquidity and safety, enhancing financial stability for their investments.

The ecosystem could potentially expand to include yield swap products, lending protocols, structured Bitcoin yield products, insurance products, and BTC-backed overcollateralized stablecoins utilizing Lorenzo Protocol’s stBTC as collateral.

With ambitious plans, Ye hopes that major financial institutions like BlackRock, Franklin Templeton, Brevan Howard, Two Sigma, Citadel, and Fidelity will eventually use Lorenzo Protocol to borrow BTC capital. “We aim to be the leading BTC bond exchange market globally,” he concluded.