Separation of Principal and Yield in Liquid Staking Tokens

BTC staking essentially involves a borrowing relationship with BTCs, where projects borrow BTCs for security and commit future earnings to raise BTC liquidity. Liquid staking tokens issued for BTC collateralization are essentially Bitcoin bonds. Therefore, Lorenzo introduces the model of separating principal and interest as

Liquid Principle Token (stBTC) + Yield Accruing Token (YAT)

to issue liquid staking tokens, maximizing the liquidity consolidation on stBTCs and releasing it into down- stream DeFi ecosystems. stBTCs correspond to a user’s right to redeem the BTC principal, while YATs correspond to the rights to redeem yield at maturity. Selected projects in the Lorenzo ecosystem can issue stBTCs and YATs to conform to the practice of separated principal and interest on Lorenzo. When a user stakes to projects through Lorenzo, the user receives the corresponding YATs from the project. YATs can be claimed according to the rules for rewards, which are issued by the project at the end of staking cycle.

Staking plan

Non-fungible YATs are produced when users stake to different projects for different durations. To avoid liquidity dispersion caused by non-fungible YATs, Lorenzo predefines staking plans, which include the project for staking and the starting and ending time of staking (i.e., staking cycle). Every staking plan in Lorenzo has the same fixed staking cycle so that rewards from different staking plans can be claimed at once. Users can only select the staking plan they wish to participate in before the staking plan begins. Staking to the same staking plan generates the same YATs.

Liquid Principal Token (LPT)

This represents the tokenization of the principal amount of BTCs that can be redeemed, with stBTC as Lorenzo’s official LPT stBTC, as described in the previous section.

Yield Accruing Token (YAT)

This represents the right to claim yield from the staked project by the end of the staking period, as described in the previous section. YATs can be traded and transferred, and become non-transferable upon maturity. Users can claim rewards from projects based on the YATs they hold.

YAT Contract Interface：

constructor(
    string memory name_, // YAT token name
    string memory symbol_, // YAT token ticker
    string memory planDescUri_, // project description
    uint256 planId_, // stakePlanId , incremental ID for staking plan uint256 agentId_ , // stakeAgentId , Staking Agent ID
    uint256 agentId_ // stakeAgentId , Staking Agent ID
) ERC20(name_, symbol_)

Lorenzo Leveraged Staking

Lorenzo leveraged staking.

As shown in the figure, one perk of the stBTC + YAT model is that, it allows stakers to add leverage to their staking by loop staking. A staker could swap stBTCs they get from staking for BTCs and keep staking into Lorenzo staking plans and get more YATs.