Author: 0xEdwardyw; Source: TokenInsight

Introduction

Staking has become a core component of the consensus mechanism based on blockchain networks, especially the Proof-of-Stake (PoS) based on Proof-Stake (PoS). On the PoS blockchain, users help maintain network security by staking locked tokens and receive staking rewards in return. This model not only enhances the security of the blockchain, but also provides token holders with a way to increase their assets.

However, Bitcoin holders have been outside of this ecosystem for many years. As the world's most valuable crypto asset, Bitcoin is based on the Proof-of-Work (PoW) mechanism. Its protocol is not designed for staking and lacks a native mechanism to participate in the network by locking BTC and earning profits.

But recent innovations, especially the emergence of the Babylon protocol, are opening up new paths for native Bitcoin staking. These progress has opened the door to the pledge ecosystem for BTC holders, allowing them to directly participate in pledge without cross-chain or using packaging assets.

Understand what is staking for Bitcoin?

Staking is a basic concept in the Proof-of-Stake (PoS) blockchain. It refers to the native tokens that users lock in the network to verify transactions, ensure network security, and maintain consensus mechanisms. In return, the staker receives a portion of the newly minted token or transaction fee. For pledgers, it is similar to the interest generated by a savings account.

This model is the core of PoS networks such as Ethereum, Solana, and BNB Chain. The more tokens the user stakes, the greater the influence it has on the network. Verifier choices are usually based on their pledge count, performance and other factors to ensure that participants who are “in the game” are motivated enough to act honestly.

Bitcoin does not use proof of stake, but uses proof of work (Proof-of-Work, PoW) mechanism. In this mechanism, miners compete for the right to keep their accounts by competing to decrypt complex password problems. This system relies on computing power rather than token holdings to ensure network security and add new blocks. Therefore, there is no "staking" function in the traditional sense in the Bitcoin protocol.

Native Bitcoin staking

For many years, the only way for Bitcoin holders to participate in staking was by packaging BTC or custody schemes—essentially converting BTC into tokens on another blockchain, and then participating in activities such as DeFi lending or income farms. But these methods sacrifice the most core features of Bitcoin: decentralization, trustlessness and self-custody.

This is exactly why native Bitcoin staking is of great significance. Emerging protocols represented by Babylon are creating a new way to allow users to pledge real BTC directly on the Bitcoin network, without packaging, cross-chain, and without having to hand over to third parties for custody.

The core of native Bitcoin staking is the clever use of Bitcoin block timestamps and cryptographic primitives. Protocols like Babylon use Bitcoin’s UTXO model and time-locked transactions to represent BTC that has been “staked”. When a user locks BTC in a time-locked output through a Bitcoin native script, a proof is generated on the chain indicating that this portion of BTC is not moveable for a period of time. These locks will be recorded by the Bitcoin blockchain's own timestamp, forming a crypto-verified, untamperable historical record.

Other chains (such as PoS networks) can reference these timestamps and independently verify that this part of BTC has indeed been pledged and not spent. There is no need to package tokens, no need to deploy smart contracts on Bitcoin, and no need to cross-chain bridges. What is ultimately realized is a trustless pledge mechanism, which can not only be recognized and utilized by other networks, but also completely retains the native features of Bitcoin.

Application scenarios of Bitcoin staking

Improve the security of PoS chain

Proof-of-Stake (PoS) Blockchain relies on economic incentive mechanisms to maintain the integrity of the network. The verifier needs to lock certain assets as collateral. If the behavior is inappropriate, these assets may face slashing. The higher the total stake value in the network, the higher the attack cost, thereby improving overall security.

However, many emerging or small-to-medium PoS chains face challenges in this regard: their native tokens have low market capitalization and limited liquidity, resulting in limited economic security of the network.

The introduction of Bitcoin as a staking asset provides a potential solution to this problem. By allowing BTC holders to stake Bitcoin to assist in protecting other PoS networks, these chains can access larger capital pools. Even if only a small fraction of BTC is used for staking, their value may exceed the total market capitalization of all native tokens in some chains, significantly enhancing the network's ability to resist attacks.

This model is especially beneficial for emerging ecosystems or early stage protocols, helping to quickly build a security foundation and attract more external participants to the network.

Creating benefits for Bitcoin holders

Native Bitcoin staking opens a new way of return for BTC holders: to obtain passive rewards by assisting external PoS chains to improve security.

These staking rewards do not come from the Bitcoin network itself, but are provided by PoS chains that introduce BTC as a staking asset to enhance their own security. PoS The network usually rewards validators and stakers through newly issued tokens and some transaction fees. BTC stakers participating in network security maintenance can also share this part of the gains.

Although most of these rewards are issued in native tokens of the PoS chain rather than BTC itself, this mechanism has transformed Bitcoin from a "passive value storage tool" to a "productive asset that can generate returns". The role of BTC has also expanded, from a simple value storage tool to the operation and security system of the decentralized network.

The leading project of Bitcoin staking ecosystem

As native Bitcoin staking gradually becomes the concept, multiple innovative projects are promoting the development of this field. They each adopt different paths to make BTC Become a productive asset while adhering to the core spirit of Bitcoin’s “decentralized, self-custodial, and no trust”.

Babylon Protocol

Babylon Protocol is a breakthrough Bitcoin staking platform, makingBTC holders can use their own assets to protect the Proof of Stake (PoS) network and earn corresponding benefits. Babylon takes full advantage of Bitcoin’s strong security and liquidity and is committed to providing robust economic security for PoS systems without the need for trust intermediaries.

Babylon has introduced a number of core mechanisms to promote the deep integration of Bitcoin and the PoS ecosystem:

Provide Bitcoin staking security for PoS chains: Babylon allows BTC holders to pledge directly on the Bitcoin main network to support the security of PoS chains. BTC holders can therefore receive pledge rewards, and the participating PoS networks are also more difficult to attack due to the increased funding threshold.

Remote staking mechanism: Users can lock BTC in self-custodial scripts on the Bitcoin chain without wrapping, hooking or cross-chaining. There is no need to trust a third party in the entire process, ensuring that the assets are controlled by the user independently.

Bitcoin Timestamping Protocol: Babylon can embed important events of other blockchains into the Bitcoin main chain through time stamps, achieving safe and reliable cross-chain state synchronization. This mechanism strengthens the consensus security and audit capabilities of the PoS chain.

Decentralized Finality Providers: The protocol has a network of more than 250 independent validators around the world, responsible for monitoring the PoS chain, verifying blocks, and writing the final confirmed information to the Bitcoin main chain through the timestamp protocol to ensure that cross-chain consensus is tamper-free and strong endpoint.

As of March 2025, Babylon Protocol's total locked position (TVL) has reached approximately 52,000 BTC, equivalent to approximately US$4.5 billion.

Lombard

Lombard Finance is a Bitcoin liquid staking agreement that allows BTC holders to maintain the liquidity of their assets while participating in staking to earn rewards. Its core product is LBTC, 1:1 by BitcoinSupported liquidity income tokens. Founded in April 2024, Lombard is committed to unleashing the potential of Bitcoin in the decentralized finance (DeFi) ecosystem and achieving seamless integration of Bitcoin assets in a multi-chain ecosystem.

Lombard is deeply integrated with Babylon, leveraging Babylon’s trustless staking infrastructure as the underlying architecture of its BTC staking mechanism. While users pledge BTC through Babylon, they can mint LBTC, use it as a representative of the liquidity of the pledged assets, and receive pledge rewards.

Lombard's core functions include:

LBTC: Liquid pledged token LBTC is Lombard's flagship product, an interest-generating liquid token supported by Bitcoin 1:1. BTC holders can obtain LBTC after pledging assets, participate in various DeFi activities, such as lending, mortgage, transactions, etc., and at the same time continue to obtain pledge income.

Cross-chain compatibility and integrated LBTC can be circulated between multiple blockchains, including Ethereum, Base and BNB Chain. Cross-chain capabilities ensure that users seamlessly use staked Bitcoin in different DeFi ecosystems and avoid liquidity fragmentation.

Decentralized Security Consortium (Security Consortium) In order to ensure the security of user funds, Lombard has established a decentralized security alliance network, where a group of trusted nodes jointly verify transactions and manage asset flows within the platform. This mechanism operates based on a consensus algorithm, adding a layer of security and trust to the platform.

Strategic cooperation and ecological integration Lombard has established cooperative relationships with multiple major DeFi protocols and blockchain networks to expand the application scenarios of LBTC. Users can use LBTC in lending platforms, liquidity pools, income farms and other scenarios in ethereum, Base, BNB Chain and other ecosystems.

LBTC's DeFi earnings opportunity:

SolvBTC

SolvBTC is a senescence launched by Solv ProtocolBitcoin assets that are compatible with full chain. SolvBTC has various sources of income, covering lending BTC to institutional-level platforms, participating in neutral hedging strategies (delta-neutral trading), and pledging in a cooperative ecosystem.

SolvBTC improves the availability and flexibility of Bitcoin through three product forms for different blockchain ecosystems:

SolvBTC.BBN: Built based on Babylon, it uses Babylon's trust-free staking mechanism to obtain validator rewards and re-staking income.

SolvBTC.CORE: Integrated in the Core blockchain, it brings benefits to users by obtaining CORE token incentives.

SolvBTC.ENA: Serves the Ethena ecosystem, and combines the synthetic dollar strategy and the native DeFi income mechanism to obtain stable returns.

Core features of SolvBTC:

Omnichain Compatibility SolvBTC can be freely circulated on multiple mainstream blockchains, including Ethereum, BNB Chain, etc. Users can participate in various DeFi platforms without being restricted to a specific ecosystem.

High Liquidity & Composability SolvBTC is highly liquid and can be widely used in lending protocols, decentralized exchanges (DEXs), and other DeFi strategies. Solv also supports LST (current pledged tokens), where users retain asset liquidity while obtaining pledge income.

Security & Transparency) Solv Protocol cooperates with institutional-level trustees to establish a layered reserve system, and introduce a proof of reserve mechanism (Proof-of-Reserve) and high-risk asset isolation to ensure the safety and transparency of user assets.

Summary

Bitcoin staking is reshaping the role and use of BTC in the crypto ecosystem. This messageAssets that are generally regarded as storage tools are gaining new utility through protocols such as Babylon, Lombard, SolvBTC. These innovative projects provide holders with a new path to earn passive returns and participate in DeFi without sacrificing asset self-custody.

As the Bitcoin staking ecosystem continues to develop and mature, the role of BTC may be redefined, no longer just "digital gold", but will become the core asset with profitability in the blockchain ecosystem, evolving from static stored value assets to productive financial assets.