Zest Protocol, a Bitcoin DeFi platform, has introduced a new yield-bearing token, BTCz. This token allows Bitcoin holders to securely stake their BTC on-chain and earn staking rewards.
The introduction of BTCz represents a significant step in advancing Bitcoin DeFi, offering users a way to generate yield from their Bitcoin holdings. Backed by investors such as Draper Associates, Binance Labs, and Trust Machines (co-founded by Muneeb Ali), Zest Protocol aims to strengthen its position in the growing Bitcoin DeFi ecosystem.
Unlocking Yield Opportunity for BTC Holders
BTCz operates through the Babylon Protocol, which specializes in trustless Bitcoin staking. Babylon enables Bitcoin holders to participate in proof-of-stake (PoS) systems while retaining control of their BTC, ensuring non-custodial staking. In its initial phase, Babylon’s mainnet, launched on August 22, capped 1,000 BTC in just six blocks, demonstrating strong demand and efficiency in the system.
The BTCz ecosystem is built around Zest Protocol, Babylon, and Stacks. Zest focuses on unlocking yield opportunities for Bitcoin holders, while Babylon provides the technical backbone for trustless staking.
Stacks, a layer-2 solution for Bitcoin, enhances security through its ability to read Bitcoin’s blockchain state directly. Stacks smart contracts verify BTC balances and stakes independently, allowing Zest’s BTC staking contract to function seamlessly across Bitcoin L1 and Stacks L2 without intermediaries like oracles. This creates a decentralized, secure environment for BTCz staking.
Enhancing Bitcoin DeFi with BTCz and sBTC
By combining Stacks’ security with Babylon’s decentralized staking architecture, BTCz positions itself as a secure staked BTC derivative. Additionally, Zest Protocol plans to gradually decentralize BTCz by aligning it with the sBTC model, a synthetic version of Bitcoin on the Stacks blockchain. The alignment will enable users to stake sBTC for yield in a permissionless manner, unlocking more DeFi opportunities for Bitcoin holders.
With the expected launch of sBTC in Q4 2024, BTCz is set to become a significant yield-generating option on Stacks. Tycho Onnasch, Founder of Zest Protocol, highlighted that pairing BTCz with sBTC will be crucial in driving secure Bitcoin DeFi adoption.
Fisher Yu, co-founder of Babylon, expressed optimism about Zest’s use of Babylon’s technology, noting its potential to enhance the broader Bitcoin ecosystem with advanced yield-generation capabilities.
Mishael Nwani | November 22, 2024
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