Binance Labs and Tim Draper-backed Zest Protocol have launched their new BTCz token in the latest development for Bitcoin-native decentralized finance (DeFi).
The new BTCz token will allow Bitcoin (BTC) holders to earn a staking yield on their Bitcoin through the Babylon Protocol.
The new Zest Protocol Bitcoin (BTCz) token could bring a significant increase in capital efficiency for the world’s first cryptocurrency, according to Tycho Onnasch, co-founder of the Zest Protocol.
Onnasch told Cointelegraph:
“[BTCz will] generate a passive yield from validation of PoS networks while retaining liquidity through BTCz as a liquid token. There are 10+ BTC-derived assets in circulation now that do something similar — however, BTCz is the only one that leverages Stacks’ unique features to offer a much greater degree of security to its holders.”
Zest is among the protocols building more utility around the world’s first cryptocurrency in a new paradigm known as Bitcoin DeFi (BTCFi), which aims to bring DeFi capabilities to the world’s first blockchain network.
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BTCz to be a cousin to Stacks’ sBTC, but the yield percentage remains unknown
Zest Protocol’s new token will be a yield-bearing cousin to Stacks’ sBTC token, according to Onnasch, who wrote:
“A yielding BTC asset like BTCz paired with sBTC will be critical for secure Bitcoin DeFi adoption, built by the engineers behind Stacks’ sBTC. This is just the start of the roll-out of our BTC yield products on Zest Protocol Earn.”
While BTCz is a promising development for Bitcoin holders, the yield-generation opportunities remain unknown.
This is because the Babylon Protocol’s yield percentage is yet to be determined, which will be the underlying yield for BTCz, Onnasch told Cointelegraph:
”Staking yield will be Babylon staking yield. Currently, BTC on Babylon is not yet producing a yield, though this will roll out as Babylon launches the validation of PoS networks over the coming months.”
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Bitcoin DeFi in 2024: Key moments
Increasingly, more protocols are building Bitcoin DeFi solutions after the 2024 Bitcoin halving introduced Runes, a new protocol for issuing fungible tokens on Bitcoin.
At the beginning of May, Hermetica launched the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities. USDh launched with an initial yield of up to 25% for users.
At the beginning of August, the world’s second-largest crypto exchange, Coinbase teased the development of a new Wrapped Bitcoin (BTC), called Coinbase BTC (cbBTC), creating widespread excitement among crypto investors.
cbBTC announcement. Source: Coinbase
The new token could significantly bolster the adoption of Bitcoin-native DeFi, according to Rena Shah, the chief operating officer of Trust Machines, a software firm building Bitcoin solutions. Shah told Cointelegraph:
“The opportunity for cbBTC, based solely on current Coinbase users, is a massive onboarding opportunity for Bitcoin DeFi…”
In July, Arthur Hayes’ Maelstrom fund announced a Bitcoin grant program of up to $250,000 per developer to advance the technical development of the Bitcoin network.
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