Track Map Overview: BTC Staking is a Key Narrative Underpinning L2
TechFlow Selected TechFlow Selected
Track Map Overview: BTC Staking is a Key Narrative Underpinning L2
The narrative around BTC asset launches has come to an end. Memecoins can always be played with, but they are not the ultimate form of the BTC ecosystem. The narrative around yield-bearing BTC assets is about to become mainstream.
Navigating Web3 tides with focused insightsAuthor: blockpunk
I. The narrative of BTC asset launches has come to an end
The era of memecoin-driven BTC asset launches is winding down. While memecoins will always be around, they are not the ultimate form of the BTC ecosystem. Instead, the narrative of generating yield from BTC assets is poised to become mainstream.
Represented by Babylon, this new phase involves staking BTC to provide economic security for other PoS chains and earning returns through staking—ushering in a new赛道 (track) of BTC staking that fundamentally transforms how users interact with the BTC ecosystem: shifting from leveraging BTC principal to leveraging BTC yield.
BTC staking is driven by two key narratives. First, similar to Ethereum’s DeFi, it enhances overall asset yield.
According to DefiLlama, the current market size of yield-generating BTC products exceeds $1 billion, with yields ranging between 0.01% and 1.25%, typically requiring delegation to third-party CeFi institutions. In contrast, PoS blockchain staking rewards often range from 5% to 20%. Staking BTC to secure other PoS chains can offer similarly attractive yields. BTC staking could deliver up to 50x higher returns compared to traditional BTC yield methods—making it a significant growth vector.
Secondly, amid the surge in BTC L2s, there's a critical gap in connecting these L2s meaningfully to the BTC ecosystem. Currently, nearly 80 BTC L2s exist, yet BTC mainnet blocks—even if fully utilized for data availability (DA)—can only support about twenty such L2s. Many L2s have already compromised by uploading BTC data only once every few months. How can these asset bridges, which rely on centralized custodians, lack BTC-backed security, and use EVM architectures, convincingly claim alignment with the BTC ecosystem? There remains a substantial narrative void here.
Clearly, becoming part of validator networks like Babylon or BounceBit provides BTC L2s with greater legitimacy. Additionally, participating in PoS staking allows early access to spillover benefits from staked BTC—offering direct advantages to both tokens and ecosystems.
However, unlike EigenLayer—a restaking platform on ETH—the market dynamics for BTC differ significantly. Most BTC holders are passive investors; 67% haven’t moved their holdings in over a year. Thus, convincing them to participate in staking poses a real challenge.
Moreover, unlike ETH staking, which offers native token-denominated yields, BTC staking rewards usually come in the form of individual L2 tokens—introducing additional risk. Some L2s using BTC as gas fees attempt to distribute collected BTC fees back to stakers, but this mechanism alone isn't sufficient to sustainably support high yields.
To put it bluntly, the primary purpose of many BTC L2s is to attract (or even mislead) BTC deposits. BTC staking represents a more efficient alternative.
Beyond staking, we must also consider BTC scalability. Building L3s atop mature L2 stacks isn't a theoretical need—it's essential. Projects like Nubit, which enable nested DA structures at the L2 level, or CBK’s UTXO Stack framework, gain technical advantages through superior architectural choices.
II. @babylon_chain
Babylon cryptographically enables native staking on Bitcoin Layer 1 to provide PoS security guarantees for other blockchains.
Babylon enables cross-chain staking where staked bitcoins remain secured within Bitcoin-native scripts. Stakers can designate validators on target PoS chains and earn corresponding validation rewards.
Technically, Babylon’s staking operates entirely via "Extractable One-Time Signatures" (EOTS), eliminating reliance on third-party bridges or custodians. It implements full slashing functionality within BTC staking: if a staker (who also acts as a validator on the PoS chain) remains honest by signing only one valid block per height, they receive staking rewards. However, if they sign two conflicting blocks at the same height (a double-signing offense), their private key can be reverse-engineered from the EOTS scheme, allowing anyone to withdraw and seize the staked BTC on Bitcoin—effectively enforcing slashing.
Currently, Babylon is running testnet staking, preparing for its next SBTC test phase in May, followed by pre-deposits later this year. Token issuance may occur by year-end. Babylon has hinted at launching liquid staking derivatives (similar to stETH). Future restaking and LRT/LST integrations are already forming with projects including @Chakrachain, @LorenzoProtocol, @yalaorg, and @SataBTC.
III. @ChakraChain
Chakra is a staking and restaking protocol for BTC. Users deposit BTC into protocols like Babylon to earn multi-layered yields. Chakra also offers validator services maintained by stakers to enhance security for BTC L2s.
Using the MuSig2 protocol, Chakra aggregates user signatures into a time-locked UTXO, enabling temporary “staking” of bitcoin directly on Layer 1. Bitcoin holders don’t need to transfer BTC to any third-party custodial address—instead, they achieve self-custody via a derived address.
The unlocked conditions for the staked BTC UTXO are twofold: first, retrieval requires co-signature between the Chakra network and the user—providing flexibility when users initiate early withdrawal requests; second, upon reaching the originally set lock-up period, users automatically regain control of their BTC—even if the Chakra network ceases operation, users can still reclaim funds on schedule.
Unlike Babylon, which can slash user-staked BTC, Chakra cannot seize user funds. Instead, it enforces consensus integrity by reducing staking rewards, further mitigating risks of erroneous slashing that could threaten users’ BTC assets.
Chakra introduces ZK capabilities into the BTC staking ecosystem and has received investments from Starkware, ABCDE, Bixin, and Coin Summer. Its testnet is currently live—early participants can connect wallets at chakrachain.io/devnet to claim proof-of-participation NFTs.
IV. @build_on_bob
BOB is a BTC-based EVM sidechain architecture built using the OP Superchain SDK. It uses wrapped BTC tokens like wBTC and tBTC from Ethereum as gas fees and plans to introduce native BTC security in the future via a novel POW merged-mining protocol.
BOB’s testnet has been operational for several months and has developed a modest ecosystem. The mainnet is scheduled to launch on May 1st. A first-phase deposit campaign is ongoing—accumulated Spice points from deposits will correspond to future $BOB tokens, distributed immediately after TGE at mainnet launch.
Participating in BOB’s pre-staking requires actions on the Ethereum mainnet. BTC holders must bridge to $tBTC or $wBTC. Pre-staking with BTC offers a 1.5x reward multiplier. Other accepted assets include DAI, eDLLR, rETH, USDC, USDT, wstETH, and STONE, with a 1.3x multiplier. ALEX, ETH, and eSOV are also accepted with a 1x multiplier.
BOB boasts strong backing, having partnered with $MARA—the largest publicly traded mining firm in the U.S.—to launch a BTCL2. It recently announced a $10 million investment from Coinbase, positioning it as a competitor to Binance-backed BounceBit. BOB’s first-phase deposit TVL currently stands around $250 million, indicating considerable potential.
Deposit link: fusion.gobob.xyz/?refCode=cdmzz5
V. @BotanixLabs
BotanixLabs has built an EVM-equivalent L2 on Bitcoin, operated under a PoS model. Users can deposit BTC into multisig addresses to participate in L2 staking or bridge BTC onto the L2 to engage with its ecosystem. A key feature is that these BTC assets are protected by a decentralized multisig network called Spiderchain.
Users can become validator nodes by staking BTC, joining both the PoS and multisig Spiderchain network. Botanix uses Bitcoin block hashes as entropy sources to randomly select nodes for block production. Finalized block headers are then inscribed onto the Bitcoin blockchain for finality.
BotanixL2 uses BTC as its settlement layer, accepts BTC as gas fees (bridged cross-chain), and leverages Bitcoin’s security for consensus assurance.
All L2 assets on BTC are safeguarded by the decentralized Spiderchain multisig network. Nodes are randomly grouped into multisig sets that collectively manage BTC held in multisig addresses. The cost of malicious behavior is high, as offending nodes risk losing their staked BTC through slashing.
Botanix has operated its testnet for six months. Visit botanixlabs.xyz/en/testnet to participate and claim various NFT credentials. Having started building BTC L2s since 2022, BotanixLabs demonstrates solid technical expertise, making its testnet a valuable opportunity for early engagement.
VI. @bounce_bit
BounceBit is an income-generating and restaking infrastructure built on BTC. It aims to integrate CeFi and DeFi models within BTC yield generation while using BTC staking to secure blockchain networks.
BounceBit itself is a BTC-based EVM L2, where PoS staking supports not only its native token BB but also direct BTC asset staking.
Additionally, BTC assets absorbed by BounceBit—including native BTC and BTCB/WBTC on BNB Chain—are held in centralized custody services supported by Mainnet Digital and Ceffu—the only institutional custody solution used by Binance. This institutional endorsement aims to alleviate BTC users' security concerns.
Deposited BTC assets become bounceBTC on BounceBit, which users can then delegate to other validator networks—such as EVM chains, decentralized bridges, or oracles—to earn validation rewards across those systems.
BounceBit delivers triple-yield opportunities: first, mainnet BTC earns stable returns via institutional CeFi custody (e.g., Binance); second, users earn BB tokens by staking on the BounceBit chain; third, they can restake assets to earn additional rewards or deploy them in AMM and lending-based DeFi activities. Supported by Binance, BounceBit will allocate 8% of its token supply to BNB stakers participating in the Binance Megadrop.
VII. @MezoNetwork
Mezo is a BTC L2 built on tBTC, leveraging a Cosmos-EVM hybrid architecture. It uses a tBTC-powered multisig cross-chain bridge to transfer BTC assets to Mezo L2.
Mezo introduces an economic mechanism called HODLProof—a Ponzi-inspired model akin to ve33 in BTC staking. Users lock BTC to participate in consensus, with longer lock-up durations exponentially increasing their staking weight and rewards.
Mezo’s PoS consists of two components: BTC staking and native MEZO token staking. Both contribute to earning veMEZO rewards, distributed across separate incentive pools—one-third of total incentives go to BTC stakers, two-thirds to MEZO stakers.
On April 9, the Bitcoin Layer 2 Mezo completed a $21 million Series A funding round led by Pantera Capital, with participation from Multicoin, HackVC, DraperAssociates, and others.
Mezo has launched an early deposit program, accepting native BTC, wBTC, and tBTC. The Mezo mainnet is expected to go live in the second half of 2024.
VIII. @LorenzoProtocol
Lorenzo is a liquid staking protocol built on Babylon, offering L2-as-a-service deployment capabilities. It aims to lower entry barriers for BTC staking platforms like Babylon, reduce slashing risks for individual stakers, and unlock liquidity for staked BTC assets.
Babylon functions as a foundational BTC staking protocol—akin to native ETH staking—and may impose minimum BTC staking thresholds.
For individual users, staking rewards may be inconsistent, while slashing risks persist. Therefore, pooled staking solutions—where risk and return are shared collectively—become essential. Lorenzo fills this role, operating similarly to Lido.
Stakers specify their desired PoS chain and deposit BTC into the corresponding Lorenzo delegation vault—a multisignature Bitcoin address managed by the protocol.
In return, stakers receive an equivalent amount of stBTC on Lorenzo’s own chain—an ERC-20-like liquid token representing their staked BTC on Babylon—enabling them to claim staking rewards seamlessly.
The Lorenzo chain itself is an EVM-compatible Bitcoin L2 secured by shared security from Babylon’s Bitcoin staking. Going forward, it will adopt modular designs to facilitate rapid deployment of additional BTC L2s, serving as an interoperability hub connecting various BTC L2 chains.
[Disclaimer] The market involves risks. Invest cautiously. This article does not constitute investment advice. Readers should consider whether any opinions, viewpoints, or conclusions presented herein align with their individual circumstances. Investment decisions based on this content are made at the user’s own risk.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@blockpunk2077
