Overview
This post lays down the future (from a product perspective) for Bitcoin Liquid Staking with pSTAKE and the solutions offered to generate yield on Bitcoin.
The core idea involves:
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Creating separate solutions for Institutions (any kind of users depositing more than 10 BTC) and Retail (everyone else)
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Launching YBTC (pSTAKE-issued Bitcoin LST) only for Institutions
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Launching a fixed yield product (like Binance Earn) for Retail
This post is authored by pSTAKE Finance contributors.
Product Background
pSTAKE has been at the forefront of liquid staking since its journey in Proof-of-Stake in late 2019. Developing multiple products in the Cosmos Ecosystem, BNB Chain, Ethereum, and Solana has provided immense insights and learnings over the years.
In May 2024, pSTAKE announced its move to the Bitcoin Ecosystem, with a view to building on Babylon’s Trustless Bitcoin Staking protocol.
Following a month-long testnet in June 2024, pSTAKE’s v1 solution which accepts native $BTC deposits went live in July 2024.
Since then, users (retail and institutions) have deposited more than $35M in Bitcoin which pSTAKE has staked into Babylon’s various caps.
pSTAKE introduced YBTC (its Liquid Staking Token on Babylon) in late October 2024 with a tentative launch in December 2024. YBTC represents users’ BTC deposits into pSTAKE which is staked into Babylon to earn Bitcoin Staking yields. YBTC reduces end-user risks by having limited, curated yield integrations, minimal custody, and not focusing on building DEX liquidity.
Due to the focus on developments like support for Babylon’s Phase 1 (which included 3 staking caps), the launch of unstaking and withdrawal support for existing users, and the launch of $PSTAKE staking, the YBTC launch has had to be paused temporarily. Especially due to the launch of withdrawals, YBTC could not have been launched in its existing state without an overhaul in the unstaking and burning mechanism.
Currently, YBTC EVM contracts are fully audited and ready to be deployed.
Context
Out of the 328+ Bitcoin (~$35M) deposited in pSTAKE, 300 BTC has been staked by Institutions through Business Development efforts. The the remaining 28+ BTC has been staked by Retail through various incentive campaigns like Babylon Rush, Early Adopters Rewards, and CEX and Wallet integrations with Binance, Bitget, Bybit.
From the above data point, it is easily inferred that the institutional appetite for Bitcoin Staking is much higher as funds, whales, trading firms, etc. look to generate Onchain yields for their BTC in a secure, trust-minimized manner.
It is well proven that scaling TVL (one of the most important metrics for a DeFi protocol) through Institutions in a sustainable manner has significantly higher ROI in terms of efforts, spending, and output than focusing on the same via Retail-dominated channels.
Considering the size of the Bitcoin Market and Bitcoin staked with other BTCfi protocols, pSTAKE must choose (and entirely focus on) the path with the highest probability of success. TVL remains one of the most significant metrics for various stakeholders within the Crypto ecosystem such as DeFi protocols for integrations, Research Firms for Coverage, Institutional Clients for Social Proof, and Centralized Exchanges for potential token listings.
New pSTAKE Product Plan
Keeping in mind the above observations and overall objectives, pSTAKE’s product plan should focus on creating separate products for Retail and Institutions.
- Launch YBTC only for Institutions
- Launch a fixed-yield product for Retail
Launch YBTC only for Institutions
- pSTAKE will launch YBTC for its existing institutional users who will receive YBTC 1:1 as per the BTC staked by them with pSTAKE
- pSTAKE will work closely with its institutional clients for the minting of YBTC, deploying it in BTCfi, and also give Babylon’s Bitcoin Staking rewards directly to them
- Institutions can leverage YBTC to generate additional yield through DeFi protocols on ecosystems of their choice
- New Institutions in the future can stake BTC with pSTAKE (or with their own finality provider) and get YBTC
- YBTC won’t have any liquidity in the market and can be unstaked normally from the protocol
- This product would cater to Institutions, Whales, Funds, etc. as a fully non-custodial way to stake BTC (to earn Babylon Staking rewards) and get exposure to BTCfi yields (through YBTC DeFi integrations)
Launch a fixed-yield product for Retail
- pSTAKE will launch a fixed yield product (similar to Earn programs on Centralized Exchanges like Binance Earn) where users can deposit BTC to generate yield through a DeFi strategy in the background
- The only strategy involved here would be staking BTC into Babylon
- This product will have a fixed annual yield (example ~7-10% APR depending on prices and staking yield) with rewards generated through Babylon Staking and $PSTAKE incentives
- No LST or representative token will be given to users of the fixed yield product as is common with Earn products
- This product would be one of the simplest trust-minimized ways to generate yield on idle BTC without performing too many steps or taking on significant risk
Actionable Points
- Launch YBTC for Institutions and integrate with relevant BTCfi protocols
- Launch fixed-yield product for Retail with compelling yields
- Scale $PSTAKE Staking to have rewards beyond $cbBTC
Benefits
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Strong USPs for the two core user personas (Retail and Institutions) of Bitcoin Staking for targeted marketing campaigns and pSTAKE to stand different to other protocols
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Substantially easier to grow pSTAKE TVL significantly with the majority of efforts and focus going to the Institutional product
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Simplified protocol operations, product development cycles, and maintenance
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Reduced risks and liabilities for the protocol and all users
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Direct connection of Retail and the $PSTAKE token staking into protocol growth flywheel
User stakes BTC with pSTAKE to get Babylon rewards and $PSTAKE incentives
User stakes $PSTAKE on Base to get cbBTC (or any other Bitcoin token) rewards
Repeat
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Enhanced opportunity for partnerships with leading BTCfi projects on 2 different aspects–YBTC integrations and $PSTAKE Staking rewards
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Clear expectations for the pSTAKE community and direction for product development and TVL growth
Timeline/Next Steps
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YBTC is set to launch for Institutions only in the 2nd week of January 2025
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Fixed-yield product for Retail will launch after input/feedback around the idea, what should be the yield APR, frequency of rewards, etc. from pSTAKE community members
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$PSTAKE Staking has been quite successful with > 1% of the total supply locked on Base and rewards given in $cbBTC. Diversification of rewards into other BTC derivatives (like Core DAO’s coreBTC, Stacks’ sBTC, etc.) can be considered once > 5% of the $PSTAKE supply is locked to introduce new growth avenues.
Participate
Everyone is invited to share their feedback and thoughts on the mentioned pSTAKE Product Plan, specifically on:
- What do you think of segregating pSTAKE’s offerings into Retail and Institutions?
- Do you think launching YBTC only for Institutions can result in a huge TVL growth boost?
- What should be the APR for pSTAKE’s fixed-yield product for Retail?
- What should the Institutional and Retail products be named for clear identity and understanding?
This post is only to provide a transparent update and gauge community sentiment and involve members into pSTAKE’s planning process. Considering community feedback, pSTAKE contributors will stick to the Actionable Points and Timeline mentioned above.