Have you ever thought, “If only I had a nickel for every time someone bought Bitcoin…”
The image below vividly depicts the emotions we’d all experience in that scenario.
But what if I told you Core has effectively found a way to make this phrase a reality?
The launch of a new Bitcoin asset, lstBTC, retains Bitcoin's key attributes while offering extra yield. Furthermore, this mechanism works such that every purchase of lstBTC means that the minter, whether aware or not, also buys CORE tokens.
TL;DR: When a vanilla BTC holder switches to lstBTC to unlock yield, they are investing in CORE. Thus, CORE represents a wager on an improved Bitcoin.
To understand the significance of what lstBTC offers, we must first assess the current state of Bitcoin's institutional yield landscape.
Spot Bitcoin exchange-traded funds (ETFs) launched at the beginning of last year. They accumulated $107 billion by the year-end and became the most successful ETF launch in history.
Despite the recent drawdown, the total assets under management (AUM) among all ETF providers remain comfortably above the $100 billion mark, showcasing the continued interest in the asset’s future.
Yet, ETFs, in their current form, have drawbacks. When you buy an ETF, your holdings can decline due to custody fees.
Naturally, the next step is figuring out how to offset those fees, making Bitcoin yield products a critical puzzle piece.
Bitcoin yields to fuel the next wave of adoption
Right now, holders can only benefit from BTC’s potential price appreciation unless they want to take on additional risk.
While there are ways to generate additional returns on BTC, practically all options require holders to forfeit direct custody over the Bitcoin holdings, either directly or indirectly, through their existing custodians holding BTC on their behalf.
The choices for generating yield on BTC are constrained, each with distinct tradeoffs:
- Lending BTC at a specific APR earns passive interest, but lenders must consider counterparty and operational risks.
- Basis trading seeks price discrepancies between Bitcoin spot and futures, offering potential returns and hedging against market volatility, though it carries risks related to credit and liquidity loss.
- Lending BTC in DeFi lacks guidelines and regulations, making it unviable for institutions. Fluctuating yields and smart contract risks add further complications.
The perfect BTC yield product should, however, offer a passive and predictable yield while also being profitable enough to warrant the investment hassle.
Also, we have to know what exact counterparty risks we’re signing up for and their implications.
Convenience is also essential, as the success of this product depends on how easy it is for institutions to start using it.
Finally, in keeping with Bitcoin's true ethos, by leveraging this product, the institutions remain in control of their principal holdings at all times.
In essence, everyone seeks to minimize risk, enjoy reliable returns, and maintain complete asset liquidity. Can this be achieved?
Well, the Core team has you covered.
What is lstBTC?
lstBTC is an innovative yield product designed to address the significant gap in Bitcoin yield offerings through its unique Bitcoin Dual Staking mechanism.
This product is offered by Maple Finance and developed alongside prominent custodians BitGo, Copper, and Hex Trust.
It addresses the typical challenges institutions encounter in choosing yield products while allowing them to retain their funds with their current custodians.
With over $500 billion in Bitcoin fees held in custodial accounts, lstBTC provides significant savings for institutions.
It allows them to achieve sustainable returns on their Bitcoin assets while maintaining the safety of their principal, liquidity, and capital efficiency in line with industry-standard custody practices.
TL;DR:
- No custody changes required – Institutions keep their Bitcoin with existing custodians.
- Real BTC yield - Earn BTC-denominated yield via Core’s Dual Staking mechanism without Bitcoin leaving the custodian.
- Fully liquid and scalable – lstBTC can be traded, transferred, or pledged as collateral while the underlying Bitcoin earns yield.
- Built for institutional use cases – Seamlessly integrates into existing and new portfolio strategies to increase returns.
How does it work?
Institutions can earn yield on Bitcoin by minting lstBTC through trusted custodians like BitGo, Copper, or Hex Trust. lstBTC remains liquid, allowing trading, transfer, and use as collateral.
Upon redemption, holders receive their original Bitcoin plus accrued yield.
When institutions smoothly convert their BTC into lstBTC, several backend processes occur, notably generating significant demand for CORE tokens.
Once holders deposit BTC into a Maple-managed vault held with qualified custodians, Maple borrows CORE tokens to participate in Dual Staking while purchasing protective put options to hedge price volatility.
This hedging approach allows the strategy to retain the upside if CORE price appreciates while still posing no risk to the principal Bitcoin.
BTC and Maple’s CORE tokens are dual-staked, earning CORE token rewards at the highest staking tier.
CORE, the driving force behind lstBTC
Let’s double-click on the relationship between CORE and BTC. Note that Maple borrows CORE tokens at the highest staking tier, which is 24,000 CORE tokens for each BTC (24,000:1).
Let’s apply some moon math to imagine institutions choosing to convert a non-productive asset like wBTC into a yield-generating asset such as lstBTC.
Keep in mind that these calculations are rough estimates, but they effectively demonstrate what is about to unfold.
In a conservative estimate, imagine that only 10% of wBTC, which is custodied by BitGo—one of the founding custodians of lstBTC—is converted to lstBTC in the first year.
That would represent approximately 13,000 BTC. Given that wBTC is currently earning less than 0.1% APR on Aave, it makes perfect sense to convert to lstBTC for a yield that's over 250 times higher while retaining your same custodian.
For that Bitcoin to be staked at the highest Dual Staking tier, as lstBTC is, currently 24,000 CORE must be staked alongside each BTC. That means heavy CORE demand.
The math is as follows:
13,000 BTC x 24,000 CORE = 312,000,000 CORE tokens bought off the market and locked away in Dual Staking.
Remember that the fully diluted supply (FDV) of CORE tokens is capped at 2.1 billion, which means that if 10% of wBTC were turned into lstBTC, that would require the purchase of 15% of CORE's FDV without any changes to the Dual Staking tier requirements.
Considering that around 72,247 CORE are paid out as block rewards in Satoshi Plus (the highest Dual Staking tier) daily, that would make for about 26 million a year in token emissions. Compared to the 312 million, that’s peanuts.
In our conservative scenario, the institutional demand for CORE tokens intended for Dual Staking would not just negate the emissions but surpass them by more than ten times.
Additionally, since Core’s emission structure resembles that of Bitcoin, emissions will steadily decrease over the next 81 years.
The result is significant buy pressure on the CORE token as institutional investors accumulate it to earn Bitcoin yield without them even knowing it.
If you think Bitcoin holders are making too great a commitment to CORE, the 24000:1 ratio in today's dollar prices means that only about 13% of BTC value needs to be staked in CORE.
This makes it highly accessible for Maple to borrow against the BTC, acquire the necessary CORE, and stake for maximum yields. Their clients don't even need to know this is happening. It represents the clearest value proposition in the industry for institutional Bitcoin holders.
The result is a Bitcoin yield product that essentially functions as a numba-go-up technology. This is because lstBTC will consistently hold a higher value than BTC, as it represents BTC plus yield, which can only be accessed by acquiring CORE tokens.
Concluding thoughts
The introduction of lstBTC marks a pivotal moment in addressing the longstanding challenges of Bitcoin yield generation for institutional investors. By leveraging Core's innovative Dual Staking mechanism, lstBTC not only retains Bitcoin's core attributes but also transforms it into a yield-generating asset.
This solution resolves critical issues such as custody risks, liquidity constraints, and the lack of predictable returns, offering institutions a seamless way to enhance their Bitcoin holdings without compromising security or control.
Beyond its immediate benefits, lstBTC drives significant demand for CORE tokens, creating a self-sustaining flywheel effect that strengthens the CORE ecosystem. As institutions adopt lstBTC to enhance their returns, they inadvertently fuel CORE's growth, aligning the interests of Bitcoin holders and the broader Core community.
Thanks to the Core team for unlocking this article. All of our research and references are based on public information available in documents, etc., and are presented by blocmates for constructive discussion and analysis. To read more about our editorial policy and disclosures at blocmates, head here.
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