Introducing Zest Protocol Earn: Bringing BTC Yield to Stacks

Zest Protocol integrates Babylon on the Stacks L2 to create the most secure staked BTC asset in the industry: BTCz.

minute read

September 6, 2024

Tycho Onnasch

Ladies and gentlemen, Zest Protocol Earn is here.

‍

We founded Zest Protocol with the mission to give users the best and most secure access to BTC yield. Today, we’re proud to announce the first BTC yield pool on Zest Protocol Earn.

‍

Before launching Zest Protocol, we spent years working on the Stacks L2 (specifically the Nakamoto Upgrade and sBTC) to create the technology for the most secure BTC yield in the industry. In preparation for this upgrade, we launched on mainnet with Zest Protocol Borrow - the first lending market on the Stacks L2 (more details here). Now that Stacks’ sBTC is around the corner, it’s time to introduce our flagship BTC yield product:

Zest Protocol Earn

Zest Protocol Earn’s first pool will be a BTC staking pool powered by Babylon. We’re incredibly impressed by the progress that the Babylon team has made to create something truly novel: BTC staking. BTC staking through Babylon will set the ‘risk-free rate’ for BTC yield that has been missing for so long.

‍

While Babylon’s progress is impressive, we were less impressed by the pooled BTC staking solutions built around Babylon. Those that we’ve seen rely on centralised custodians, a third party oracle, and/or a messaging system to confirm that deposited BTC has been staked on Bitcoin L1 by the controlling protocol.

‍

This presents a clear opportunity to leverage the unique technology of the Stacks L2 to build a more secure pooled BTC staking solution. This is what we’re announcing today.

Security First

Zest Protocol’s staking pool brings the best of the Stacks L2 and Babylon together to create the most secure pooled BTC staking experience possible.

‍

As the leading Bitcoin L2, Stacks provides unique security features to Zest Protocol’s Babylon BTC staking product. Stacks smart contracts have the unique ability to read Bitcoin state, allowing the contracts to independently verify changes to Bitcoin balances. This allows Zest Protocol’s BTC staking contract on the Stacks L2 to independently verify BTC stake on Bitcoin L1, without relying on a third party oracle or messaging system.

Yield bearing BTC on Stacks: BTCz

After staking their BTC through Zest Protocol, users receive a tokenised representation of their staked BTC that can be used in DeFi. We’re calling this BTCz. BTCz will progressively decentralise towards the Stacks sBTC design to create a decentralised and permissionless peg that yields BTC. Users will also be able to deposit sBTC to earn a yield through BTCz. We’re excited to leverage our experience building sBTC, to create the first yield bearing BTC derivative on Stacks - and with that, the most secure yield bearing BTC in the industry.

‍

BTCz will be sBTC’s yield bearing cousin, driving sBTC and Stacks network adoption. Closely following the sBTC launch on Stacks, we’ll seek to build deep liquidity between BTCz and sBTC on Stacks DEXes. In addition, BTCz would be ideal collateral on the Zest Protocol Stacks market as well as other protocols in the ecosystem. Because BTCz will count as TVL on Stacks, it will be especially appealing to those who are long STX. Users will also want to stake (some of) their BTC through Babylon and have a liquid representation of their BTC. The future of Bitcoin is built in layers.

‍

“We are excited to see Zest Protocol leverage our technology to enhance Bitcoin yield generation on Stacks. We look forward to observing how this innovation contributes to the broader Bitcoin ecosystem.” Fisher Yu, Co-founder, Babylon.

Wen Launch?

We’re planning to launch the smart contracts as soon as security audits are completed. These contracts will allow users to stake BTC on Zest Protocol and benefit from Stacks’ read access to Bitcoin state to secure their stake. Initially, Zest Protocol’s BTC staking product will launch with Cobo MPC wallet custody. Building a decentralised peg like sBTC on Stacks will take some more time. Once sBTC is live, BTCz will progressively decentralise to its decentralised peg script.

‍

In the media:

‍