Bridge in the fog. Image by Jay Huang via License: Creative Commons

LBTC is designed to make it possible to earn interest on Bitcoin while holding it. The publisher, Lombard, has borrowed something from another blockchain.

Something has changed in Bitcoin over the past year, especially since Taproot and Ordinals. The Bitcoin community is opening up to ideas that were previously closed to other blockchains, such as NFTs, tokens, and DeFi.

Part of this is tokenized bitcoins: bitcoins that, in one form or another, end up on a sidechain or other blockchain to be able to do more there. The classic example of this is BitGo’s WBTC, and less classic but more innovative are the iBTC tokens on a Polkadot parachain.

With LBTC, Lombard is launching a completely different version of tokenized Bitcoin, and has now received $16 million in funding, led by Polychain Capital, a prolific investor in the crypto space.

LBTC is, according to Lombard, “an interest-paying cross-chain token, backed 1:1 by Bitcoin.” You hold Bitcoins, but earn by staking them on other blockchains or providing liquidity to decentralized exchanges as an AMM. You have the stability of Bitcoin and the profits of DeFi.

Lombard is not really decentralized. Users effectively give control of their Bitcoins to other people. At least Lombard tries to decentralize control of the coins through a “consortium” and secures them through CubeSigner.

Babylon is working in the background. This “own layer” for Bitcoin is Lombard’s partner – and has already received $18 million in funding from Polychain. There is clearly a strategy behind the investments.

Just as Eigenlayer uses Ethereum’s economic stakes to secure other decentralized services, Babylon stakes Bitcoins to create PoS chains or sidechains, for example. As with Eigenlayer, this could create a whole new world of decentralized services, for which additional blockchains are just the beginning.

Babylon is currently still in the testnet. It will therefore take some time before Babylon generates interest that has a real economic basis. LBTC as a simple, liquid access to Babylon could then become interesting.

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