What Is A Bitcoin Liquid Staking Plan (BLSP)?

Lorenzo is a liquidity finance layer for bitcoin. Those who wish to earn yield on their bitcoin while retaining access to the underlying liquidity can use Lorenzo to stake their bitcoin and receive Liquid Principal Tokens (LPTs) and Yield Accruing Tokens (YATs) in return. 

Typically, figuring out how and where to stake bitcoin can be difficult; however, Lorenzo Protocol makes it easy with streamlined bitcoin management, matching stakers with world-class projects in need of bitcoin liquidity and security. Key to this are Bitcoin Liquid Staking Plans (BLSPs).

Understanding BLSPs

BLSPs are all about simplifying the user experience of earning yield via bitcoin staking and retaining access to the underlying staked liquidity. A BLSP represents a specific project or opportunity for bitcoin staking, along with its associated rules and parameters. Each plan clearly outlines how the staked bitcoin liquidity will be used, the rules for issuing bitcoin staking tokens, and how stakers will be rewarded. This transparency allows users to make informed decisions about where to allocate their bitcoin for staking.

Each BLSP has its own name, symbol, description, plan ID, agent ID, start date, end date, annual percentage yield (APY), URL, underlying proof-of-stake (PoS) chain, reward distribution mechanism, and staking rules. These are the specific attributes of BLSPs that make them unique from each other.

Additionally, each BLSP has its own yield-accruing token YAT, which is needed to receive the rewards associated with the bitcoin that has been staked. These tokens are different from each other and not fungible between different BLSPs because different plans come with different rewards for the stakers.

Who Can Create A Bitcoin Liquid Staking Plan?

A BLSP can be created by any project or entity looking to obtain bitcoin liquidity on the Lorenzo platform. Lorenzo serves as the foundational layer for issuing and settling bitcoin-based financial instruments, providing a mechanism for projects to leverage staked bitcoin liquidity effectively. Developers of PoS blockchains, decentralized finance (DeFi) applications, and other projects interested in creating financial products tied to bitcoin liquidity can establish a BLSP to attract and utilize bitcoin from stakers. 

The Process Of Creating A BLSP

Creating a BLSP involves outlining the rules and guidelines for how staked bitcoin liquidity will be used, defining the terms for issuing bitcoin staking tokens, and determining how rewards will be distributed to the stakers. The creator of a BLSP may choose to set one up for several reasons. For example, they might need to access a pool of bitcoin liquidity to support a DeFi project, such as a decentralized oracle network or a collateralized lending protocol. However, the main use case of BLSPs, for now, is for garnering stakers to secure a PoS blockchain, usually as a Bitcoin Layer 2 network. By creating a BLSP, these entities can obtain the necessary liquidity while simultaneously providing a way for bitcoin holders to earn rewards on their staked assets.

Tokenization And Yield Distribution

When users stake bitcoin in a BLSP, the liquidity is tokenized by Lorenzo into LPTs (most commonly, stBTC) and YATs. This first-of-its-kind tokenization process empowers the BLSP creator to use the staked liquidity to develop and expand various DeFi applications in the bitcoin economy while ensuring that the original stakers receive yield as compensation. 

It’s a win-win situation for all participants.

Babylon-Lorenzo-01 is an example of a BLSP in Lorenzo. The rules of this plan say that those who deposit bitcoin will receive an equal amount of stBTC in return on the Lorenzo AppChain. Additionally, deposits will receive YATs that are redeemable for the associated staking rewards from Babylon and Lorenzo at the conclusion of the staking contract.

Unlocking Bitcoin Liquidity For DeFi

BLSPs on the Lorenzo platform provide a structured and transparent way for users to stake their bitcoin, retain access to their underlying liquidity, and earn yield. By outlining specific rules and parameters for each staking opportunity, BLSPs simplify the decision-making process for users and attract liquidity to various projects and networks. 

This framework not only benefits bitcoin holders seeking to earn rewards but also enables developers and projects to effectively leverage bitcoin liquidity for diverse financial applications. By simplifying the liquid staking process, Lorenzo BLSPs can help unlock billions of dollars in untapped bitcoin liquidity for DeFi.