Zest Protocol, backed by Binance Labs and Tim Draper, has introduced a new yield-bearing token known as BTCz. This development aims to enhance the DeFi landscape for Bitcoin.

The BTCz token is designed to enable Bitcoin (BTC) holders to receive staking rewards through the Babylon Protocol.

Tycho Onnasch, one of the co-founders of Zest Protocol, highlighted that the BTCz token could significantly improve the capital efficiency of the cryptocurrency.

“[BTCz will] generate a passive yield from validation of PoS networks while retaining liquidity through BTCz as a liquid token. There are several BTC-derived assets in circulation now that have similar functionalities; however, BTCz is unique in leveraging Stacks’ features to provide enhanced security for its users.”

Zest acts as a key player in the Bitcoin DeFi (BTCFi) movement, which seeks to expand utility for Bitcoin by introducing various decentralized finance options.

BTCz: A Companion to Stacks’ sBTC

The forthcoming BTCz token will serve as a yield-bearing counterpart to Stacks’ sBTC, according to Onnasch, who stated:

“A yielding BTC asset such as BTCz in conjunction with sBTC will be essential for secure adoption of Bitcoin DeFi, developed by the engineers responsible for Stacks’ sBTC. This marks the beginning of unveiling our BTC yield offerings on Zest Protocol Earn.”

While the introduction of BTCz appears promising for Bitcoin holders, the specific yield generation opportunities remain unclear.

The yield percentage for the Babylon Protocol, which will underpin BTCz, is still to be determined, as noted by Onnasch:

“Staking yield will mirror the Babylon staking yield. At present, BTC on Babylon is not generating a yield, but this capability will be launched as Babylon starts validating PoS networks in the months ahead.”

Key Developments in Bitcoin DeFi for 2024

In light of the Bitcoin halving in 2024, a growing number of protocols are exploring Bitcoin DeFi solutions. This shift has already led to the introduction of Runes, a protocol for creating fungible tokens on Bitcoin.

In early May, Hermetica launched the first-ever synthetic United States dollar backed by Bitcoin, known as USDh, which offers yield-generating capabilities, starting at an initial yield of up to 25% for participants.

Also, in early August, Coinbase hinted at the development of a new Wrapped Bitcoin (BTC) called Coinbase BTC (cbBTC), generating substantial interest in the crypto community.

Rena Shah, the chief operating officer of Trust Machines, expressed optimism about cbBTC, suggesting that it could significantly enhance the adoption of Bitcoin-native DeFi:

“The potential for cbBTC, based solely on current Coinbase users, presents a tremendous opportunity for onboarding into Bitcoin DeFi…”

In July, Maelstrom fund, spearheaded by Arthur Hayes, revealed a grant program offering up to $250,000 per developer to further the technical evolution of the Bitcoin network.