Lombard receives $16 million investment for Bitcoin DeFi token

Brücke im Nebel. Bild von Jay Huang via flickr.com. Lizenz: Creative Commons

With LBTC, it is intended to make it possible to earn interest on Bitcoin while holding them. The issuer, Lombard, has taken some inspiration from another blockchain.

Over the past year, something has changed with Bitcoin, particularly since Taproot and the Ordinals. The Bitcoin community is opening up to ideas that were previously reserved for other blockchains, such as NFTs (non-fungible tokens), tokens, and DeFi (decentralized finance).

Part of this evolution includes tokenized Bitcoins: Bitcoins that, in one form or another, land on a sidechain or another blockchain to achieve more. The classic example of this is the WBTC from BitGo, while a less classic but more innovative example is the iBTC token on a Polkadot parachain.

With LBTC, Lombard is introducing a completely different version of tokenized Bitcoin and has now secured funding of $16 million, led by Polychain Capital, a well-known investor in the crypto space.

LBTC is, according to Lombard, „an interest-bearing cross-chain token, backed 1:1 by Bitcoin.“ You hold Bitcoins but earn income by staking the Bitcoins on other blockchains or providing liquidity to decentralized exchanges as an AMM (Automated Market Maker). You get the stability of Bitcoin and the profits of DeFi.

Lombard is not truly decentralized. Users effectively relinquish control of their Bitcoins to other entities. However, Lombard attempts to decentralize control over the coins through a „consortium“ and secures them using CubeSigner.

In the background, Babylon is working. This „Eigenlayer“ for Bitcoin is Lombard’s partner and previously received $18 million in funding from Polychain. The investments appear to be part of a larger strategy.

Just as Eigenlayer uses Ethereum’s economic stakes to secure additional decentralized services, Babylon stakes Bitcoins to create PoS (Proof-of-Stake) chains or sidechains, for instance. Much like Eigenlayer, this could give rise to an entirely new world of decentralized services, for which additional blockchains could be just the beginning.

Babylon is currently still in the testnet phase. It will likely take some time before Babylon generates interest that has a real economic basis. LBTC, as a simple and liquid access point to Babylon, could then become interesting.