The quest to use liquidity denominated in bitcoin in the decentralized finance ecosystem is in full swing.
In the latest example, Bitcoin restaking startup Lombard and yield infrastructure protocol Veda announced a new partnership on Wednesday: a DeFi vault that aims to be a one-click solution enabling LBTC holders to earn passive yield. LBTC is Lomboard’s yield-bearing cryptocurrency backed 1:1 by BTC. According to the protocol’s documents, LBTC’s yield stems from rewards earned from BTC securing proof-of-stake blockchains.
The new DeFi vault is a smart contract that uses capital in various DeFi strategies, such as liquidity provisioning, lending, and even bridging to different chains in pursuit of yield. “The vault is deploying LBTC capital across a variety of DeFi opportunities, including Uniswap, Pendle, Morpho, GearBox… blue chip protocols that have existed for a while,” Sunand Raghupathi, the co-founder of Veda, told Unchained.
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A LBTC/WBTC liquidity pool was created on Uniswap on June 18 and has had a volume of over $130,000 in the past 24 hours, per crypto trading analytics platform DexTools. Raghupathi said the freshly launched vault is “already deploying LBTC into Uniswap… to create liquidity between WBTC and LBTC.” Initially, the yield of the new Lombard-Veda DeFi vault will come from users’ trading fees for swapping between LBTC and WBTC, with additional strategies coming soon.
According to blockchain data from Etherscan, the supply of LBTC in circulation increased from 1,757 on Tuesday to 2,768 on Wednesday. Moreover, the number of LBTC holders jumped from 709 wallet addresses to 2,391 in the same time period. LBTC is backed 1:1 with BTC, making its market cap $109.2 million at current prices. While LBTC is intended to provide a yield to its holders, Raghupathi said LBTC holders are currently earning “points,” and not yet accruing staking yield, which will be denominated in LBTC, according to Raghupathi.
Points are a mechanism for crypto teams to track a user’s engagement and are used to determine how many tokens a user should receive in the event of a future token airdrop.
Kevin He, the co-founder of Bitcoin L2 network Bitlayer, called the integration between Veda and Lombard “a mutually advantageous partnership,” writing to Unchained over Telegram, “Veda gains access to substantial Bitcoin liquidity, while LBTC benefits from more yield-bearing opportunities.”
UPDATE (Aug. 28, 3:11 p.m. ET): Clarified change in the supply of LBTC and number of LBTC holders
