Analysis of BounceBit: How to create a closed loop of Restaking income?

Right now, the Ethereum Restaking track is in full swing. Eigenlayer has cleverly packaged the "Ethereum Security Consensus" into commodities and exported them, forming a closed loop of POS chain re-staking returns. Then POW How can the BTC chain realize the Restaking closed loop?

Yesterday @bounce_bit   completed 6M financing led by Blockchain Capital, which attracted attention. How does it implement Restaking, the native asset of BTC? Next, let me talk about my understanding.

Originally, BTC assets, as a mainstream asset with absolute consensus status, will be cross-chained to mainstream public chains such as Ethereum in the form of Wrapped, and appear in loans such as MakerDAO and AAVE. in the platform’s optional collateral list. Usually users pledge BTC to a trusted centralized custodian to generate WBTC ERC20 tokens and then use them in the Ethereum DeFi ecosystem. This is also a liquidity sharing solution, but there are two problems: 1) The rights of the trusted centralized subject are too great, and the security of cross-chain assets depends on the centralized platform, which limits the weight of this kind of Wrap assets in the Ethereum system. Users naturally prefer Ethereum natives such as DAI and ETH. assets, and will be wary of foreign assets; 2) Native BTC assets do not have any original income in the original POW native environment. Cross-chaining them to other ecosystems is equivalent to plundering the ecological spillover income of other chains. It is difficult to derive a rich income model. The income is small + the trust cost is large. Limits the enthusiasm of user assets to cross-chain. Based on this, we can deduce that if a native BTC POW chain wants to derive a reliable asset closed-loop gain model that can achieve diversified returns, it needs to meet two conditions: 1) The POW chain needs to be transformed into a POS chain or have an exclusive POS chain. The node Validators pledge the native assets and convert them into voting rights to consolidate the security of the POS chain, which will bring basic "mining" benefits to the native assets; 2) Staking’s LSD certificates can be circulated within its own extensive DeFi ecosystem to obtain various additional benefits. If it can break the limitations of this chain and overflow liquidity to the entire chain or even the off-chain environment, it will be better to obtain benefits. After understanding this level, it is easy to look at the re-staking solution provided by BounceBit. To put it simply: BounceBit has built a layer1 POS chain parallel to BTC. It focuses more on the subsequent circulation and income of assets. It is not affected by the current technical limitations of the BTC main network and the bottleneck of the development of BTC layer2. The goal is It brings rich and diversified income models to BTC’s native assets and gives BTC Holders an optional currency holding and financial management possibility.

How it works?

1) BounceBit did not hide the issue of cross-chain "centralization" of BTC's native assets and directly openly stated the centralization. However, it chose compliant On the CeFi platform, users can host assets to custody service platforms with compliance qualifications such as Mainnet Digital and Ceffu. After custody, you can obtain Wrapped assets such as WBTC or BTCB at a ratio of 1:1, and this type of compliant custody institution has a better design in terms of asset transparency and financial auditing, providing a trust guarantee for asset entry for the subsequent POS chain. It stands to reason that BTC Holder can also directly cross-chain assets to the BounceBit POS chain through technical methods such as MPC cross-chain bridge. This is the current mainstream asset cross-chain method for second-layer chains, but this type of cross-chain method is also inherently subject to The centralization problem limited to multi-signature principals is no different from the centralization problem of compliant custodians. 2) Users can pledge Wrapped assets and BounceBit tokens into the POS Validator verification system of the BounceBit chain, which is equivalent to using a dual-token pledge model to provide network security for the POS chain, obtain stable annualized mining income, and LSD Vouchers can obtain other mining benefits in a series of DeFi protocols derived from this POS chain. The annualized income from staking is relatively fixed, and the possibility of subsequent development of the chain ecosystem will be very large. For example, other DeFi protocols, oracles, cross-chain bridges, etc. can stake the LSD to obtain new income, which means that native Token will benefit from the subsequent ecological growth of the entire POS chain. In order to quickly build an ecosystem, BounceBit supports programming-level connectivity with other EVM chains, which allows developers to easily migrate applications with low threshold. Of course, with the opening up of this layer of chain abstraction, it also provides the technical possibility for LSD to overflow into other ecosystems to obtain benefits. 3) Eigenlayer innovatively proposed a very sexy narrative on the Ethereum chain. Active nodes (AVS) on the chain can participate in the network governance of other chains, output Ethereum security consensus to other chains, and then obtain off-chain re-staking benefits. , this is the core reason why this wave of Ethereum Restaking craziness makes everyone not afraid of consensus overload. Eigenlayer has seized on the modular trend, and more and more cutting-edge chains are trying to quickly implement their demands on "security consensus", directly packaging the overflowing Validator verification capabilities of Ethereum into Ethereum security consensus products and exporting them. BounceBit has captured the solid currency holding demand of BTC asset Holders. At the same time, BTC is currently equivalent to an isolated chain and has not yet effectively penetrated liquidity into other full-chain environments. In response to this, BounceBit has created a fresh narrative of DeFi + CeFi. The LSD certificates pledged by users on the custody platform can obtain incremental benefits on the original CeFi custody service platform. This actually anchors a considerable off-chain financial market income possibility. In the context of the passage of the BTC ETF, this is really a sexy and imaginative narrative. Don’t forget that the compliant CeFi custody platform itself can also obtain a large number of off-site gains, such as staking mining, lending services, investment products, etc. Usually, in order to avoid systemic security, these assets will be transparently disclosed publicly. mechanisms and necessary authorization thresholds for asset usage rights, etc. In my opinion, this is the core innovation brought by BounceBit's POS chain to re-pledge of BTC's native assets. BTC Holder needs a channel to obtain diverse income. BounceBit takes the compliant CeFi platform as the core and introduces the POS chain staking mining mechanism. At the same time, it uses Restaking to extend LSD to a CeFi original income market with unlimited imagination.

A Restaking closed loop that inputs a predictable return model for BTC assets has been formed.

Thinking about it from another angle, isn’t the BTC ETF itself a huge off-chain gain restaking solution? This solution that combines the native revenue environment on the Web3 chain (POS staking) + the incremental revenue off the Web2 chain (custody revenue) is particularly suitable for the current BTC ecosystem. It is said to be the first innovative protocol in the BTC re-staking track and Not an exaggeration.

The macro aspect can connect to the potential growth opportunities of ETFs, the technical aspect can open up the subsequent outbreak opportunities of the BTC Restaking market, and the economic aspect can indeed bring triple benefits to BTC Holder , providing the possibility to promote POW chains such as BTC to realize POS revenue models.