The ancestors laid out the bottom line of this article: theoretically, you can certainly stack stBTC, LPT/YAT, lending, stablecoins, market making, and derivatives layer by layer, making the annualized return look quite beautiful when 'stacked'; but what truly determines whether you can take away your profits is never how many layers the APR is stacked to, but whether you have written the risk boundaries of each layer into a bill that you can refer to at any time. The most dangerous illusion of BTCFi is treating 'multi-layer returns' as 'creating something out of nothing', while in reality it is more like splitting the same BTC risk into different forms and then making you bear, exchange, and amplify it using different tools.
To make you think this through clearly, I will first fix the roles of the three puzzle pieces in one sentence. stBTC is more like 'a BTC underlying certificate with Babylon staking yield attributes'; it gives you a relatively explainable source of underlying returns; LPT is a certificate on the principal side, leaning more towards 'I have the right to this principal'; YAT is more like 'yield rights notes', allowing returns to be traded separately or used independently for strategies; external protocols turn these certificates into a toolbox that can be 'borrowed, collateralized, marketed, and hedged'. If you confuse the roles, the yield path will turn from 'structured' into 'chaotic stacking'.
Next, I will construct several typical 'multi-layer return paths', but I want to emphasize: I’m talking about path logic, not suggesting you copy it, and certainly not saying that layering more is better. You can treat it as a risk training: after reading a path, ask yourself, 'Where is the liquidation line for my path, and what will I lose in the worst case?'.
The first path resembles a 'conservative two-layer puzzle'. You enter Lorenzo with BTC or BTCB to obtain stBTC, enjoying the first layer of underlying returns; then you put stBTC into a lending protocol with deep liquidity and a mature liquidation mechanism to earn the second layer of interest rate spread or incentives. This path seems simple, but the risk points are very clear: first is the price anchoring and liquidity depth of stBTC; if the secondary market liquidity is thin, extreme cases may lead to discounts, causing the collateral value to shrink passively; second is the liquidation threshold and oracle mechanism of the lending protocol; once volatility triggers liquidation, you don’t just 'earn a little less', but rather 'the principal is forcibly sold'. Therefore, the correct approach for this path is: keep a thick collateral ratio, choose markets with better depth, and treat the borrowed stablecoins as 'liquidity buffers' rather than 'immediate leverage'.
The second path is the 'strategy faction of yield rights separation'. You get LPT + YAT from Lorenzo, then use YAT as a yield right to trade or market make, earning from the 'pricing volatility of yield rights' layer, while LPT continues to represent your rights to the principal. Its advantage is separating yield from principal, allowing you to manage risks more granularly: you can even choose to move only the yield and not the principal. Its risks are also very intuitive: the price of YAT essentially reflects the market's expectations for future yields, and changes in expectations can cause it to fluctuate significantly; moreover, yield rights assets usually rely more on market liquidity, and once liquidity is insufficient, slippage can swallow up the strategy's returns. If you treat it as 'stable yield', you are using a knife as a spoon; it is more like 'the trading rights to the yield curve', suitable for those who can bear volatility and are willing to keep an eye on the market.
The third path is the 'funding efficiency faction of stablecoin CDP'. You collateralize stBTC into a CDP system like Satoshi Protocol to borrow stablecoins (like SAT), and then use the borrowed stablecoins for more stable returns or market making, forming a 'base return + stablecoin return' dual engine. It sounds great, but the real risk of this path is that you have moved the volatility risk from 'price fluctuations' into 'the liquidation line'. Once BTC retraces, your collateral ratio decreases, and liquidation does not happen slowly; it directly cuts your position. Worse, many people, after borrowing stablecoins, cannot help but buy more BTC exposure, creating a cycle of leverage, which turns 'originally manageable volatility' into 'volatility that must be precisely avoided'. To survive longer on this path, the key is not whether you can find returns, but whether you can manage the collateral ratio: you need to treat yourself as running an asset-liability balance sheet, not just playing APR stacking.
The fourth path is the 'liquidity market making faction'. You bring stBTC or enzoBTC to multiple chains (for example, through Wormhole/Portal), find a DEX pool with decent depth to market make, earning transaction fees and possible incentives, while the underlying stBTC still carries yield attributes. The temptation of this path is that it seems like 'earning two profits from the same asset'. But market making can never avoid impermanent loss, especially when BTC volatility increases; the transaction fees you earn may not cover the losses from passive rebalancing of positions; cross-chain also adds systemic risk from bridges and target chains, as well as liquidity risk upon exit. The correct mindset is to treat cross-chain market making as a 'bet on liquidity and ecology', rather than a 'guaranteed profit generator', and always prioritize exit efficiency—whether you can exit when you want is far more important than whether you can earn an extra 3% in fees.
The fifth path is the 'derivative hedging faction', which is more like what mature funds would pursue. You use stBTC as the underlying to earn returns, but in the derivatives market, you hedge a part of the directional risk using futures or options, making the returns closer to 'interest rates' rather than 'betting on market movements'. Its core is not to pile up the APR but to reduce the volatility of returns and turn the strategy into a more sustainable risk budget. The cost is that you have to bear hedging costs, margin management costs, as well as face basis volatility. Many people focus only on the upper limit of returns and not the lower limit of volatility, but those who truly make money in the long term often care more about 'whether the return curve can be smoothed out'.
After reading these paths, you should feel a unified rule: multi-layered returns are not a free lunch; they break down risks into more switches, giving you more control while also providing more opportunities to make mistakes. Leverage amplifies returns but also amplifies liquidation; separating principal and interest increases strategic space but also increases price volatility; cross-chain expands use cases but also increases systemic uncertainty; market making incurs transaction fees but also brings impermanent loss and exit challenges. The most common 'liquidation stories' in BTCFi are not because the underlying income logic is wrong, but because someone, after the third or fourth layer, still manages their positions with the risk awareness of the first layer.
So I will say the rules of this article a bit more harshly: starting today, the threshold for BTCFi is no longer 'whether to find a high APR', but 'whether to do risk layering'. You need to be able to correspond each layer of income to a specific source of risk: is it bridge risk, liquidation risk, counterparty risk, liquidity risk, or the leverage risk you created yourself? If you can't do this, adding another layer isn't smarter; it brings you closer to an accident.
Finally, here’s an action guide in the style of Azou: I will summarize it in one coherent sentence: If you really want to try multi-layer returns, start with two layers, keeping the collateral ratio buffer until you feel 'too conservative', then write down the exit conditions for each layer—when to take profit, when to reduce positions, when to directly withdraw to the base; always start with a 'small trial run' to confirm cross-chain arrival, pool depth, liquidation thresholds, and fee structures before scaling up positions; don’t immediately use the borrowed stablecoins to add to higher volatility positions, treat them as a risk cushion first; finally, remember one most counterintuitive principle—when you find yourself only focusing on APR and can no longer clearly state where the liquidation line is, you are already stacking yields with emotions; it’s time to reduce a layer, not add another one.
