LBTC market on Fluid

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Lombard (LBTC) <> Fluid

Author: Maksym Repa (Head of DeFi at Lombard)

Links:

Summary

This proposal recommends listing Lombard’s LBTC—a liquid-staked Bitcoin built on Babylon—as a supported asset on Fluid for Ethereum. By adding LBTC as collateral, Fluid will unlock the borrowing demand for pegged BTC assets such as cbBTC and WBTC to provide a foundational source of yield for BTC lending within the Fluid ecosystem. Additionally, listing LBTC as a borrowable asset would enable looping opportunities with assets such as eBTC from Ether.fi and PT assets from Pendle.

Lombard’s Background

Lombard’s mission is to expand Bitcoin’s role in decentralized finance (DeFi), turning it from a passive asset into a productive financial tool. Our core product, LBTC, is a secure, liquid-staked Bitcoin token that enables users to earn yield by securing PoS networks via Babylon, while preserving the original value of their BTC. As a 1:1 BTC-backed, yield-bearing token, LBTC facilitates cross-chain movement without fragmenting liquidity, aligning Bitcoin seamlessly with DeFi use cases.

Our team includes seasoned DeFi experts from Polychain, Argent, Coinbase, and Maple, each with deep experience in scaling DeFi ventures. Lombard is incubated by Polychain Capital, which led a $16 million seed round in July 2024 with investments from Babylon, dao5, Franklin Templeton, Foresight Ventures, Mirana Ventures, Nomad Capital, OKX Ventures, and Robot Ventures. In October 2024, Binance Labs further strengthened Lombard’s backing by joining the extensive list of strategic partners.

Lombard’s Security

Lombard stands as the most secure Bitcoin Liquid Staking Token (LST) protocol, addressing both security and depeg risks.

BTC Security: Lombard employs a trust-minimized, decentralized security model for BTC. Using a validator network (“Lombard Consortium”), validators notarize deposits to allow minting/burning of LBTC. Key management and a robust set of policies (off-chain smart contracts) that cryptographically restrict the actions the Lombard Consortium can take, preventing malicious actions or actions not intended by the Lombard Protocol. Multi-factor approvals and a withdrawal delay are required for withdrawals, as an extra precaution.

Depeg Protection: LBTC is the most liquid Bitcoin LST on the market, supported by $70 million in DEX liquidity on Ethereum. With plans to expand across chains, we intend to scale in a comparable fashion, which means that Lombard’s DEX liquidity will keep expanding exponentially. Lombard’s LBTC is exclusively backed by native BTC and has been fully redeemable since its launch. Additionally, Lombard is the first and only BTC LST to implement a proof-of-reserves oracle built in collaboration with Redstone.

Chaos Labs previous risk assessments:

Smart Contract Audits & Bug Bounties

Security Incidents: None

LBTC: The Market Leader

Beyond its security-first design, LBTC has emerged as the leading market player in Bitcoin staking, representing over 40% of the Bitcoin LST market share and serving as the largest staker on Babylon. Additionally, LBTC ranks as the fourth-largest overall BTC derivative, trailing only WBTC and cbBTC.

LBTC Value Proposition

Yield-Bearing Collateral: LBTC provides an underlying yield from staking BTC within Babylon, making it a yield-bearing asset. Bitcoin LSTs are positioned to follow the success of yield-bearing ETH LSTs by offering BTC holders an effective way to maximize capital efficiency.

Ideal Collateral for Underutilized cbBTC and WBTC: Demand for leveraged LBTC exposure is consistently high across lending markets, where utilization rates for LBTC borrowing frequently reach maximum capacity. This presents a unique opportunity for Bitcoin lenders on Fluid Protocol to unlock sustainable lending yields, addressing a gap in DeFi where BTC lending yields historically remain below 1% APY.

LBTC x Pendle PT tokens: Lombard has a dominant market position on Pendle with $170m in liquidity in the form of LBTC or eBTC (backed by LBTC). Leveraging PT tokens against LBTC offers a unique opportunity to capitalize on BTC’s fixed yield.

Incentives: Listing LBTC on Fluid opens the door for users to tap into a range of incentives from leading BTCfi protocols, including Lombard and Babylon. LBTC deployed on Fluid earns Babylon Points and benefits from Lombard’s Lux program, providing a 3x Lux boost for LBTC and a 2x Lux boost for cbBTC and WBTC supplied on Fluid.

Lombard Ecosystem Flywheel: Integrating LBTC within Fluid feeds into a powerful “flywheel” effect within the Lombard ecosystem, enhancing its value proposition across DeFi. In less than three months since its launch, Lombard has demonstrated strong network effects, establishing exclusive partnerships that benefit every protocol utilizing LBTC. Examples include LBTC’s role as the exclusive collateral for ether.fi’s LRT eBTC and the Lombard DeFi Vault, built in partnership with Veda and uniquely incentivized by Corn. These strategic integrations create additional opportunities for protocols integrating LBTC to access net new liquidity and unique incentives.

Conclusion

This proposal outlines a strategic opportunity for Fluid Protocol to tap into a rapidly growing BTCfi ecosystem, onboarding the leading asset within the category - LBTC. With over 40% market share in Bitcoin LSTs and ranking as the fourth-largest BTC derivative, LBTC combines secure, yield-bearing capabilities and robust liquidity.

Adding LBTC will tap into high borrowing demand for BTC-pegged assets like cbBTC and WBTC, and lopping opportunities for fixed yield with Pendle’s PT tokens, providing a strong yield source for BTC and enhancing ecosystem liquidity. Fluid users will gain access to incentives from Lombard’s ecosystem, creating a flywheel effect that drives adoption, liquidity, and rewards, supporting DeFi growth.

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Thank you for your proposal @Maksym

Instadapp team is supportive of launching LBTC vaults on Fluid lending market and also the DEX

We will prepare an onchain proposal with the suggested vaults and parameters

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