In this circle for a long time, you will find that many big opportunities actually have traces to follow. Recently, when I was researching the Lorenzo Protocol, I always had a strong sense of déjà vu—this feeling was like going back to the eve of the Ethereum DeFi Summer in 2020, or when the concept of 're-staking' was first proposed by EigenLayer in 2023.
Why do I say this? Let's rewind the timeline and see what Ethereum has gone through. The early ETH was very similar to the current BTC; people held it, waiting for appreciation and paying a little Gas fee, with basically no other use.
But with the emergence of liquidity staking protocols like Lido, ETH has become an income-generating asset; later on, EigenLayer emerged, allowing the security of ETH to be 'outsourced' to other networks, achieving more with less. These two waves directly created a DeFi market worth hundreds of billions of dollars.
Bitcoin today stands at the same crossroads, and the Lorenzo Protocol feels like it is bringing this 'alchemy' verified by Ethereum into the Bitcoin ecosystem in a more refined way.
Many friends ask me, since there is Babylon as an underlying protocol to solve the staking technology problem for Bitcoin, why do we still need Lorenzo?
This actually involves the question of who will do the 'dirty work'. Babylon is indeed great; it has opened up the channel for Bitcoin as a PoS security asset on a technical level, but on the user experience level, participating in staking directly through Babylon has a very high threshold for ordinary people, and can even be described as 'inhuman'. You need to filter validator nodes yourself, handle complex scripts, and always worry that if you accidentally select the wrong node, your funds could be penalized.
Lorenzo plays a role very similar to that of Ether.fi or Puffer back in the day. It is not just an entry point but also a 'service layer'. It encapsulates the cold, complex underlying code into a product we are familiar with.
For users, you don’t need to understand what a 'timestamp server' or 'EOTS signature' is; you just need to know: I put BTC in, Lorenzo takes care of node filtering, risk grading, and liquidity release, and then I take stBTC and leave.
More importantly, Lorenzo has grasped the core narrative of 'Liquid Restaking'.
In the world of Bitcoin, liquidity is more expensive than gold. If you lock your Bitcoin on-chain for a few months just for that bit of interest, you are likely to be picking up sesame seeds and losing watermelons.
Lorenzo's stBTC is actually creating a brand new 'synthetic asset'—it contains the value of Bitcoin itself along with the 'security service yield' provided by the Babylon ecosystem.
This means your Bitcoin is no longer a static digital gold, but has become a liquid digital oil that can serve as collateral, trading pairs, or margin across various DeFi protocols.
This is where I find its logic valuable: it is not reinventing the wheel, but filling a huge market vacuum. Currently, the market value of Bitcoin is three times that of Ethereum, but the scale of income-generating assets on the Bitcoin chain is less than a fraction of Ethereum's. This huge discrepancy is where the biggest Alpha lies in the coming years.
Of course, replicating does not mean simple Copy Paste. The underlying architecture of Bitcoin (UTXO model) is much more complex than Ethereum's, and getting Liquid Restaking to work in such a constrained environment presents exponential technical challenges. Lorenzo's choice to enter at this moment and build a large system that includes token issuance standards, settlement layers, and asset management layers indicates that the team is aiming not for short-term hype but to capture the largest piece of the BTCFi wave—'fundamental liquidity'.
So, if you regret not understanding Lido back in the day or feel that EigenLayer is too crowded, consider turning your attention to the Bitcoin ecosystem. Here, the game has just begun, and Lorenzo is trying to set the rules.
