Unleashing Bitcoin's Potential: Discover BTCz Liquid Staking on Zest Protocol!

With staking becoming a reality for Bitcoin's layer-1, users can soon trade liquid staking tokens on layer-2 networks. Zest Protocol, a decentralized finance (DeFi) service operating on Stacks, has announced the launch of BTCz—a BTC equivalent that generates yield for holders through the Babylon staking system.

What is BTCz?

“The BTC yield comes from Babylon staking or other BTC staking protocols that might launch in the future,” stated Tycho Onnasch, co-founder of Zest Protocol. Babylon Labs recently revealed that its protocol enables users to stake their BTC to secure multiple external blockchains, including the growing ecosystem of Bitcoin layer-2 solutions.

The Future of Liquid Staking

David Tse, co-founder of Babylon, expressed enthusiasm for liquid staking, predicting it will achieve significant popularity similar to its success in the Ethereum ecosystem. Onnasch explained that Zest users deposit BTC to receive BTCz in return, which appreciates over time as BTC accumulates backing for each BTCz issued, akin to stETH.

Security and Decentralization

The security of BTCz will be reinforced by Stacks, the Bitcoin layer-2 where BTCz operates, thanks to its smart contracts that can read Bitcoin state. This allows Zest Protocol’s contracts to independently verify staking balances on Bitcoin layer-1 through Babylon without relying on third-party or oracle services.

BTCz is set to become a yield-bearing counterpart to the upcoming sBTC, a pegged BTC asset from Stacks, which is part of the anticipated Nakamoto upgrade. Onnasch described BTCz as “sBTC’s yield-bearing cousin on Stacks.”

Currently, the Zest lending protocol boasts $25.46 million total value locked (TVL) according to DeFi Llama.