Bitcoin Restaking: LBTC Brings Dual Yield to EigenLayer

LBTC, a wrapped Bitcoin derivative, has launched restaking on EigenLayer, offering holders a novel opportunity to earn dual yields: traditional staking rewards plus protocol-level fees from restaking services. This approach promises to boost effective returns well above standard BTC staking, attracting both long-term investors and yield hunters.

Market overview

Bitcoin’s price has hovered near $113,500 in late May, driven by strong ETF inflows and easing macro pressures. Meanwhile, derivative volumes have climbed, with BTC options open interest topping $10.2 billion fafa. Against this backdrop, LBTC restaking taps into surging demand for yield-bearing Bitcoin products.

Wrapped Bitcoin products like LBTC have grown in AUM over 30% since Q1, now aggregating $1.6 billion across DeFi platforms. The integration with EigenLayer—an emergent restaking protocol—signals an inflection point for Bitcoin holders seeking both security and composability.

Restaking mechanics

EigenLayer enables permissionless restaking of staked assets into additional services, such as oracle validation or data availability. LBTC, which represents Bitcoin cross- chain via tBTC and RenVM, can now be pledged on Ethereum to receive rLBTC—a token denoting both staked principal and restake commitments.

Onboarding process

Users deposit LBTC into EigenLayer’s vault, which issues rLBTC at a 1:1 ratio. Behind the scenes, EigenLayer stakes the underlying BTC via institutional custodians, routing rewards through Lido’s staking pool before distributing to rLBTC holders each epoch.

“Our goal is seamless integration—users don’t need to manage keys or reapprove,” says EigenLayer lead developer Anjali Rao. “rLBTC flows natively into any DeFi protocol accepting ERC-20 tokens.”

Dual yield structure

rLBTC holders earn two distinct income streams:

• Base staking rewards: ~1.8% APR from Lido’s pooled ETH staking mechanism, proportional to BTC staked via wrapped ETH bridges.
• Restaking fees: 2–4% APR paid by services running on EigenLayer (e.g., oracle or bridge operators), aggregated and disbursed in ETH each epoch.

Combined yields currently range between 4% and 6%, depending on service demand. Compared to 2%–3% from standard BTC staking via custodial services, rLBTC’s dual yield model represents a significant enhancement.

Risk factors

While rLBTC’s yields are attractive, several risks merit consideration:

Slashing exposure

Restaking services can incur protocol-level penalties (slashing) if a service provider misbehaves. Although EigenLayer spreads risk across multiple services, a major incident could affect all rLBTC holders.

Counterparty & bridge risk

LBTC relies on cross-chain bridges (RenVM, tBTC) to represent BTC on Ethereum. Bridge exploits or custodial failures could temporarily halt redemptions or impact token value.

Smart-contract vulnerability

EigenLayer and wrapping contracts are still new. Despite third-party audits, undiscovered bugs could pose risks. Users should limit allocations relative to total portfolio.

Conclusion

LBTC’s restaking on EigenLayer marks a pioneering step in Bitcoin’s evolution into composable DeFi assets. By layering base staking rewards with protocol fees, rLBTC offers a compelling yield proposition—so long as participants understand slashing and bridge risks.

As DeFi matures, hybrid models like rLBTC will likely proliferate, blending yield with liquidity and versatility. Savvy investors can capitalize on dual yields while managing allocations prudently, positioning for the next wave of Bitcoin-driven innovation.

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