Bitcoin L2 Core Launches Liquid Staking for BTC

The Core Foundation announced Thursday that it will launch a BTC-backed liquid stake token on the Bitcoin-backed Layer 2 “Core” network.

The token, called LstBTC, will be an ERC-20 token linked 1:1 to BTC, which also accumulates daily rewards for holders.

Liquid staking in Bitcoin

According to Core DAO, staking rewards will be paid in CORE tokens – the native utility and governance token of the Core network.

“LSTs are the missing ingredient in Bitcoin DeFi, and the introduction of LstBTC will help kickstart the Core ecosystem,” said Rich Rines, an early contributor to Core DAO. “With LstBTC, the Core ecosystem is expected to attract new builders, launching their own LSTs on Core.”

Core is an EVM-compatible Bitcoin sidechain that uses both fusion mining and delegated proof-of-stake to secure its network, a consensus mechanism called “Satoshi Plus”. This allows it to creatively inherit Bitcoin’s security while including much more functionality than Bitcoin L1 can offer.

Native Bitcoin staking is now a reality thanks to Babylon’s builders, who found a way to allow average Bitcoin users to stake their BTC in escrow to secure other blockchains, such as Core. Once an explicit proof-of-stake privilege of networks like Ethereum and Solana, BTC holders will soon have access to consistent performance generated from multiple L2 blockchains at once.

Traditionally, betting came with the trade-off of needing to lock in assets for the privilege of earning a return. However, liquid staking gives users complete freedom to move and potentially trade their BTC while earning passive returns and possibly even deploying it for further returns in other DeFi protocols.

Although LsBTC is issued on Core, it is backed by BTC in a multi-sign wallet on Bitcoin L1. This introduces new trust assumptions about standard BTC holdings, meaning it is technically possible to attract investors.

“Multisig wallets undergo rigorous security audits, which ensure that users’ assets are well protected, while allowing them to benefit from the liquidity and rewards that LstBTC offers,” Core DAO clarified.

Bitcoin’s Expanding DeFi Ecosystem

On Thursday, Stacks Bitcoin L2 protocol Zest also announced the launch of its liquid staking token, BTCz. Unlike LstBTC, this token will appreciate over time as the amount of BTC BTCz support slowly grows.

The Stacks blockchain regularly checks its security in Bitcoin L1 and its smart contracts have the ability to read the state of Bitcoin. Stacks released the final stage of its Nakamoto upgrade late last month, which made transactions on Stacks faster by orders of magnitude.

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