Financing Bitcoin Staking Tokens

LPTs and YATs represent the entire market of tokenized Bitcoin staking. Each can be transferred and traded so that developers can make infinite innovations leveraging the assets.

Assuming Lorenzo will have a TVL of 10 billion BTCs and about 20% annual yield, the market size of LPTs and YATs will be roughly 10 billion and 2 billion BTCs, respectively. Thus, there is a huge opportunity to build a DeFi ecosystem around LPTs and YATs. The following are a few different DeFi sectors to be covered:

(1) Exchanges for LPTs and YATs

An LPT like stBTC could be considered another form of wrapped Bitcoin and could eventually replace wBTCs in almost all use cases. The value of YATs comes from both the accrued yield and the speculation for future yield. Given the volatile nature of YATs, there needs to be a market for trading them. The trading pairs between stBTC and all of the YATs will be the fundamental ones. There could also be trading pairs among LPT, YAT, and other popular crypto assets such ETH, BNB, and USD stablecoins, creating huge arbitrage and investment opportunities for investors.

(2) Lending protocols

Borrowers could use LPTs and YATs as collateral to borrow whatever assets that are needed; in return, stakers are given much bigger control over their investments and liquidity.

(3) Structured Bitcoin yield products

With novel algorithms, differently structured Bitcoin yield products could be created. One example would be Bitcoin fixed-income products, which previously could not be created as Bitcoin has no inflation, but now can exist as LPTs and YATs bring yield into the equation.