Updated: December 30, 2024

Bitcoin staking’s incredible innovations have driven the need for new solutions to maximize bitcoin’s potential.

Traditional staking models require users to lock up their assets, sacrificing liquidity for yield. Meanwhile, liquid staking protocols have tended to limit staking opportunities for the native Layer 1 chain, restricting users’ ability to maximize their yield.

With the introduction of stBTC, the Babylon liquid staking token (LST), Lorenzo Protocol unlocks bitcoin liquidity for yield earning across the broader DeFi ecosystem, facilitating yield customization through an increasing roster of integrated applications.

In this article, we’ll explore how stBTC token operates in the Lorenzo ecosystem and what steps you need to take to acquire it.

Overview Of Liquid Staking Tokens

Liquid Staking Tokens are tokens that represent staked assets in a blockchain network.

They allow users to stake their tokens to secure a network while, at the same time, maintaining the ability to trade or use their assets for other financial activities. In other words, they let users receive staking rewards while retaining liquidity.

Read more about Liquid Staking Tokens - https://lorenzo-protocol.xyz/academy/what-are-liquid-staking-tokens

What Is stBTC?

stBTC is a Babylon reward-bearing BTC-equivalent LST, earning yields from Lorenzo and Babylon staking. Its value, therefore, is a reflection of the market price of bitcoin in combination with the value of accrued yields

This makes stBTC a powerful tool for BTC holders looking to unlock liquidity, earn rewards, and actively participate in decentralized finance—all while maintaining exposure to bitcoin’s price movements.

In practice, when users deposit bitcoin into the Babylon yield vault, their liquidity is then deposited to Babylon via staking. In exchange for their liquidity, users receive an equivalent amount of stBTC and can ultimately redeem that stBTC to receive their original deposit back. For example, staking 10 BTC would return 10 stBTC, which could be returned for 10 BTC plus their earned yield.

stBTC Advantages

• Liquidity Without Sacrificing Yield: stBTC enables users to unlock the liquidity of their staked bitcoin so they can trade, transfer, and use stBTC across DeFi platforms, while still accruing rewards from their initial staking position.
• Advance Your BTC Savings: Adding powerful Babylon yields to your BTC holdings transforms them into a yield-bearing asset, helping your portfolio gain from the growth of BTCFi and the price appreciation of bitcoin.
• Omnichain presence: stBTC is already available on a growing list of 15+ chains and dozens of supported applications. Use stBTC to expand your retained BTC liquidity across networks to further your yield earnings, all while continuing to earn Babylon rewards from the yield vault.

The stBTC Journey

Acquiring stBTC begins with staking bitcoin to Lorenzo Protocol’s staking dApp, followed by a simple, standard token holding lifecycle.

STEP 1: Stake BTC

Users begin the staking process by depositing bitcoin (or accepted BTC-equivalents) into the Babylon yield vault. Lorenzo yield vaults determine how staked BTC will be utilized, the rules for issuing staking tokens, and how rewards will be distributed.

STEP 2: Get stBTC

Upon staking, the user receives stBTC.

STEP 3: Hold / Use

After receiving their stBTC, users have multiple options for using their tokens within the Lorenzo DeFi ecosystem:

• Holding: Users can simply hold their stBTC to wait for the staking cycle to complete, at which point they will be able to redeem their original BTC.
• Trading: Because stBTC is a liquid asset, users can trade them on decentralized exchanges. This flexibility allows users to manage their risk, take advantage of market movements, or diversify their portfolios without waiting for the staking cycle to end.‍
• Utilizing In DeFi: Lorenzo's ecosystem allows users to use stBTC in various DeFi protocols, such as lending, borrowing, or yield farming, to further maximize their returns.

View stBTC chain integrations - https://docs.lorenzo-protocol.xyz/user-guides/assets

STEP 4: Withdrawing BTC & Yields

Withdrawals

Users can choose to withdraw their BTC principal at any time from BNB Chain or Ethereum. If a user has bridged their liquidity to a different chain, they can use the Lorenzo Bridge to return stBTC to BNB Chain or Ethereum and then unstake.

Receiving Yield

The yield attached to stBTC is tied to the future launch of the Babylon token. Upon Babylon’s token launch, Lorenzo will receive an allocation proportionate to its staking activity with Babylon. These rewards will then be distributed to stBTC holders, reflecting the yield they have accrued through staking.

stBTC vs. wBTC

Wrapped Bitcoin (WBTC) is an ERC-20 token representing bitcoin on the Ethereum blockchain, enabling bitcoin holders to participate in Ethereum’s DeFi ecosystem without selling their bitcoin.

While stBTC and WBTC are similar in the sense that they are both BTC-equivalent tokens, there are several noteworthy differences.‍

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Underlying Purpose
stBTC: Represents staked bitcoin principal within Lorenzo’s staking portal dApp, as well as accrued Babylon yield.
WBTC: Acts as a bridge between bitcoin and Ethereum networks.

Ecosystem Integration
stBTC: Integrated into Lorenzo’s DeFi ecosystem, spanning across a variety of chains and applications.
WBTC: Used across multiple Ethereum-based DeFi applications.

Yield Generation
stBTC: Part of a system generating staking rewards from Babylon and Lorenzo Protocol.
WBTC: Does not inherently generate yield but can be used in yield-generating protocols.

A New Era Of Bitcoin Liquid Staking

As the first company to implement BTC with a dual deposit tokenization system, we’ve introduced stBTC as our native liquid principal token alongside yield accruing tokens. This marks a major breakthrough in Bitcoin finance.

Our tokenization system unlocks unparalleled flexibility and opportunities in Bitcoin staking, with stBTC at its core. Bitcoin holders can now fully harness the potential of their BTC by putting it to work in the growing DeFi ecosystem.

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Welcome to Lorenzo Protocol!

Our platform helps you turn your bitcoin into yield-bearing property, enabling you to advance your portfolio gains beyond bitcoin's price appreciation. Put plainly, Lorenzo helps you earn money from your bitcoin without having to sell it!

The magic takes place in our decentralized application (dApp), where you can access advanced DeFi yield tools and reward-bearing LSTs like stBTC.

Let's dive into how you can get started!

Access Bitcoin Staking dApp

To begin, you'll need to first head to our website - https://lorenzo-protocol.xyz/

Next, click the "MENU" button to view navigation choices.

Click "STAKING PORTAL" to visit the dApp.

Navigating The dApp

Upon accessing the dApp, you'll see a dashboard with a variety of options and information to explore—don't worry about any of that yet, we'll cover it later in this guide.

To get started, click the "Connect Wallets" button.

Now, choose your preferred wallet from the list of options and follow the steps to complete the wallet connection.

With your wallet connected, you're now ready to leverage our dApp to its full potential!

Let's now explore each key page and component.

Personal Center

To access your personal center, click the profile icon at the top right corner of the screen.

On the Personal Center page, there are two primary components to engage with.

My Portfolio

View your BTC asset portfolio breakdown and earned rewards.

Lorenzo Points

View the Lorenzo TGE points that you have earned and how to earn them.

Staking

The staking page is where the majority of dApp utility exists.

On the left side of the page, you can stake BTC-equivalent assets in exchange for stBTC and execute the unstaking process.

To stake, first choose your liquidity source chain and input the amount of the supported token which you'd like to stake in exchange for stBTC.

In the below example, we've selected BNB Chain and .0001 of BTCB.

Next, press the "Stake" button.

Click the "Confirm" button and approve the transaction in your wallet to complete the staking process.

On the right side of the staking page, view your claimable rewards and rewards history, click the rotating carousel to access active campaigns, and view a live points summary.

Bridge

Once you've acquired stBTC by staking to the dApp, you can use the bridge page to transfer your stBTC liquidity to other chains and explore the world of BTCFi!

On the bridge dashboard, first, select the chain that your stBTC is currently on.

If you minted stBTC through the Lorenzo dApp, it will be on BNB Chain by default.

Next, select the network that you'd like to bridge your stBTC to.

Now, input the amount of stBTC you'd like to bridge.

Click "Send stBTC" and confirm the transaction in your wallet to complete bridging.

Campaign

The campaign page is where your stBTC liquidity comes into play!

Here, you can view ongoing, upcoming, and ended yield opportunities spanning across the global BTCFi ecosystem.

Click a campaign card to expand its details and start earning!

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Start Earning Now

With Lorenzo Protocol, turning your Bitcoin into a yield-bearing powerhouse is easier than ever. Whether you’re staking, bridging, or participating in exciting campaigns, our platform empowers you to unlock new opportunities in the BTCFi ecosystem.

We can’t wait to see what you achieve—start exploring today and take your Bitcoin journey to the next level!

Visit dApp - https://linkly.lorenzo-protocol.xyz/staking-blogs

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If you enjoyed this blog, share it with a friend and invite them to the Lorenzo community!

To stay informed on all Lorenzo staking updates and opportunities, please visit and follow the regular updates on X (Twitter), Telegram, and Discord.

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2015 to 2017 was an incredibly significant time in the history of bitcoin due to the crisis that emerged in the form of the bitcoin Block Size War.

This crucial technical debate over the future of bitcoin development put the cryptocurrency network’s decentralization and unwavering ruleset to the ultimate test, providing an educational moment for the entire world regarding how bitcoin works and what makes it valuable at the most fundamental level.

During this period, some were unsure if bitcoin would survive the turmoil and wondered if the cryptocurrency experiment was about to fail; however, at the battle’s resolution, bitcoin emerged much stronger and more credible thanks to this test of its stability and security.

While some may see the bitcoin Block Size War as nothing more than a technical debate over a simple parameter on the network, it was much more complex than that. Let’s take a look at the entire history of the Block Size War from start to finish and the lessons that can be taken from it going forward.

Bitcoin Becomes Too Successful

It’s difficult to state the exact time when the bitcoin Block Size War first began, but one place to start is when the technical debate over bitcoin’s block size limit went outside of the normal bitcoin development process and into the world of social media. In particular, wider recognition of the block size issue began when then bitcoin developer Mike Hearn announced a new, alternative piece of bitcoin software, known as Bitcoin XT, in August 2015, which had implemented a way of increasing the block size limit via a hard fork, known as Bitcoin Improvement Proposal (BIP) 101.

The block size limit is the amount of data that can be included in each newly mined block on the network. It is also effectively a limit on the number of transactions that can take place, as each individual bitcoin transaction takes up varying amounts of space in the blocks. A hard fork is a type of backward-incompatible change to the network consensus rules that requires all bitcoin users to update their software and effectively move over to a completely new network with a different set of rules.

Fellow bitcoin developer Gavin Andresen had previously promoted BIP 101 for inclusion in Bitcoin Core; however, the change was unable to gain consensus among developers. Andresen, Hearn, and others were concerned that bitcoin would become unusable as it became more popular because network congestion would lead to unreliable transactions and high fees.

In other words, the perceived problem at hand was that bitcoin was becoming too successful. Obviously, this was a good problem for the network to have; however, the increase in transactional activity on the network meant that bitcoin was approaching the capacity limit. Bitcoin creator Satoshi Nakamoto had previously limited the amount of data that can be included in each bitcoin block to 1 megabyte (MB), possibly as a way to prevent denial-of-service attacks on the network.

While bitcoin transactions had been practically free when there was less usage on the network, hitting the block size limit would create a situation where users were effectively entered into a bidding war to get their transactions included in the next block. This was extremely problematic for a currency that had been heavily promoted as a cheaper alternative to traditional online payment methods. Andresen even predicted that the block size limit would never be hit even if it was not increased because users would abandon the network as it became less user-friendly and more expensive to use.

Fortunately for bitcoin, his prediction did not come true.

Multiple Bitcoin Hard Fork Proposals Fail

Andresen’s plan via BIP 101 was to first increase the block size limit to 8 MB, then have that new limit automatically increase regularly over time at a rate that amounted to a doubling roughly every two years. If this plan had been implemented at the time, the block size limit would be around 128 MB at the time of writing in summer 2024.

While this may seem like a simple solution to an avoidable problem at first glance, there were two key issues with this plan brought up by other developers. First, increasing the block size limit would also increase the computational resources for operating a bitcoin full node. This was a rather severe concern, as bitcoin’s entire value proposition comes from all participants being able to validate transactions on the network. This is what allows bitcoin to remain decentralized, uncontrollable, and trusted.

Secondly, BIP 101 was a plan to implement this clearly controversial and contentious increase in resource requirements via a hard fork. Over time, this issue of hard forking would arguably become more contentious than tweaking the block size limit parameter itself, partially due to the risk of bitcoin splitting into two separate, incompatible networks.

While fees were still low when the original Bitcoin XT announcement post was made, things hit a breaking point in 2017 when the bitcoin network started to near its capacity limit for the first time. The effects of this network congestion were tumultuous, as bitcoin transaction fees skyrocketed and wallet users began complaining about payments being stuck on the network due to the low fees users had grown accustomed to attaching to their transactions. Many large bitcoin exchanges and wallet providers, such as Coinbase and Blockchain.com, began to publicly support various hard forking block size limit increase proposals around this time.

Bitcoin XT kicked off the Block Size War, but several other alternative bitcoin software clients that implemented block size hard forks were also tried after Bitcoin XT failed to gain sufficient traction. Bitcoin Classic was an attempt to implement a relatively small, one-time increase to 2 MB, while Bitcoin Unlimited promoted the philosophy of removing the block size limit entirely, putting control over the parameter into the hands of the miners creating the blocks. However, these other attempts to increase the block size limit via a hard fork also failed. While Satoshi had written about how the block size limit increase could be phased in at a later date post-creation, his other prediction about users becoming “increasingly tyrannical” about limiting the size of the bitcoin blockchain also came true.

Enter SegWit

Of course, most other developers were not in favor of making no changes to bitcoin at all in the face of this issue of transaction congestion. In fact, a hard forking increase to the block size limit was not completely off the table. Instead, these other developers were focused on using the currently available block space as efficiently as possible before opting for an increase to its 1 MB block size limitation.

Indeed, major users of block space, such as exchanges, could implement changes to their own internal practices, such as transaction batching and proper fee estimation, to be less wasteful with block space. On top of that, these developers supported a multilayer approach to scaling bitcoin payments, most notably via the Lightning Network, which was mostly theoretical at the time.

Multiple soft forking changes to bitcoin that improved the functionality of the Lightning Network, namely OP_CHECKLOCKTIMEVERIFY (CLTV) and OP_CHECKSEQUENCEVERIFY, had already been implemented at this point in time, but another key change that was needed was a fix to transaction malleability, which was a bug that made chains of unconfirmed bitcoin transactions unreliable. The proposed fix was known as Segregated Witness (SegWit), and it was combined with an effective soft forking (backward compatible) block size limit increase.

While SegWit was mostly noncontroversial as a bug fix for transaction malleability, some participants on the bitcoin network, namely a large portion of miners, held back on implementing the change in an effort to force a larger increase to bitcoin’s block size limit via a hard fork. This decision from miners was particularly problematic because part of the process of activating SegWit on the network was first getting 95% of miners to signal that they had updated their software with the SegWit upgrade. In addition to philosophical opposition to SegWit, some miners may have been benefiting from a mining efficiency gain known as ASICBOOST, which would have been broken by SegWit.

The bitcoin user base was now at a crossroads where activation of both a hard forking increase to the block size limit and the combined soft forking increase with SegWit seemed unlikely.

The Messy Resolution To The Bitcoin Block Size War

In an effort to find a resolution to the various proposals for bitcoin’s development path going forward, key entities in the bitcoin exchange, wallet, and mining industries met during a cryptocurrency conference in the spring of 2017. Notably, Bitcoin Core developers were not at this meeting. At the conclusion of this meeting, a document known as the New York Agreement was published. The document outlined a plan to activate SegWit and then implement a hard forking increase to the block size limit some months later in a proposal that became known as SegWit2x.

While some bitcoin users were happy at the perception that the multiyear Block Size War had finally been resolved, others noted that bitcoin governance was now seemingly being controlled by a small number of bitcoin-related companies, which was problematic for the system’s underlying value proposition. In other words, there were concerns that bitcoin had come under corporate control. Part of this criticism was based around how the SegWit2x development process was handled, as it was perceived more as a corporate decree rather than a proposal made to the bitcoin user base.

At around the same time, a grassroots effort to simply activate SegWit on the network with or without miners via a process known as a user-activated soft fork had also gained traction. The SegWit2x plan was made more compatible with this effort via BIP 91 to make sure the SegWit activation process went smoothly. The result was that SegWit achieved activation in the summer of 2017.

While the signers of the New York Agreement had agreed to run code that would activate a hard fork after SegWit had been activated, the reality was there were several signs — perhaps most notably a futures market that enabled betting on a potential split caused by the hard fork attempt — that this backward-incompatible change did not have the consensus that was necessary for it to happen successfully. Ultimately, the hard fork was abandoned by key members of the New York Agreement a few months later. In other words, the bitcoin network received the SegWit upgrade, but a hard forking increase to the block size limit did not happen.

Key Takeaways From The Block Size War

So, what are the lessons that should be taken from the bitcoin Block Size War?

For one, it showed how difficult it can be to alter anything about bitcoin’s protocol rules. While bitcoin’s capacity was increased both on the base chain and via the promotion of secondary payment layers via the SegWit soft fork, implementing such a change via a hard fork was simply out of the question.

Despite the failures of the various hard fork proposals and the resulting short-term harm on the overall bitcoin user experience, the fact of the matter is that people kept using the cryptocurrency. The free market had decided that protecting the digital gold use case was more important than on-chain coffee payments for now, and the bitcoin network’s resistance to a controversial hard fork underscored this value proposition of an apolitical, uncontrollable, and digitally native reserve asset.

Notably, no other cryptocurrency has withstood this sort of attack on its immutability, which is why the Block Size War is the key event that separates bitcoin from the rest of the market.

The difficulties associated with making improvements to the bitcoin network illustrate the sturdiness and soundness of the network and its underlying cryptocurrency. Of course, with it being difficult to change bitcoin at the base layer, it may not adopt new technologies as soon as they become available. Taproot is the only other change that has been made to bitcoin’s consensus rules since SegWit was activated.

There is bubbling demand for the activation of various covenants-focused soft forks that could offer further security improvements to Bitcoin Layer 2 networks; however, the tradeoffs associated with these changes have yet to have been proven worthy of activation. That said, this is the development path that has been chosen for bitcoin by its collection of users — and to be clear, it appears to be the correct one.

While the Block Size War was mostly an argument over whether bitcoin should be more digital gold or PayPal 2.0, the reality is a multilayer approach to scaling enables both use cases. Bitcoin’s stability and security at the base layer enables the bitcoin asset to act as digital gold, while more experimental financial features can be developed and expanded upon on secondary layers, such as the Lightning Network and Lorenzo Protocol.

At the end of the day, the most important takeaway from the resolution of the Block Size War is that bitcoin proved it can withstand an attack of influence from the most prominent stakeholders in the system and maintain its apolitical and neutral ruleset. It is this underlying value proposition of the bitcoin asset that makes every other aspect of decentralized finance (DeFi) possible.

Of course, this is not to say bitcoin will not face similar issues in the future, perhaps coming from nation-states or other similarly sized final bosses.

While many of the supporters of the losing side of the block size debate moved onto alternative projects, such as Bitcoin Cash and Ethereum, in an effort to experiment with their own visions for how blockchain technology should be used, there has recently been an increased interest in building out these sorts of use cases as secondary layers on top of bitcoin itself.

With it now being truly possible for everyone to get what they want on bitcoin via Layer 2 networks, it’s possible for the split in the digital community between bitcoin maximalists and more adventurous experimenters to finally come to an end. With everyone united under bitcoin as the base money of DeFi, the cryptocurrency revolution will become stronger than ever.

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