Bitcoin decentralized finance (DeFi) protocol Zest unveiled BTCz, a new option for users to deploy BTC and earn a yield. BTCz holders can participate in staking via the Bitcoin staking protocol Babylon, which is enhanced by the security features of the Layer 2 scaling solution Stacks.

“With the upcoming sBTC launch in Q4 of 2024, Zest Protocol’s BTCz is set to become sBTC’s yield-bearing counterpart on Stacks,” said Tycho Onnasch, Founder of Zest Protocol, in a written statement. “A yielding BTC asset like BTCz paired with sBTC will be critical for secure Bitcoin DeFi adoption, developed by the engineers behind Stacks’ sBTC. This is just the beginning of our rollout of BTC yield products on Zest Protocol Earn,” he added.

Babylon has introduced a trustless Bitcoin staking system, allowing BTC holders to generate yield by participating in Proof-of-Stake systems in a non-custodial way. The first phase of its mainnet launched last month, quickly reaching a cap of 1,000 BTC in six blocks.

Zest Protocol utilizes the security features of Stacks, whose smart contracts can access and read the state of Bitcoin. This helps contracts verify alterations in Bitcoin balances. Consequently, Zest Protocol’s BTC staking contract on Stacks Layer 2 can independently confirm BTC staking on Bitcoin Layer 1 via the Babylon staking protocol, avoiding the use of third-party oracles or messaging systems. This integration, in combination with Babylon’s design, positions BTCz as a highly secure, staked BTC derivative.

Apart from utilizing Stacks’s capability to access the Bitcoin state for enhanced security, Zest Protocol’s BTCz is set to gradually decentralize, similar to the Stacks sBTC design. This transition aims to establish a decentralized and permissionless peg. Additionally, individuals will have the opportunity to deposit sBTC and earn yields via BTCz.

A Few Words About Zest Protocol

The team behind Zest Protocol has extensive experience in developing Bitcoin applications and infrastructure. Its Co-founders were early members at Trust Machines, a Bitcoin infrastructure firm co-founded by Stacks creator Muneeb Ali. While working there, they contributed to the design and elaboration of sBTC.

Recently, the project successfully closed a $3.5 million seed round of financing led by Draper Associates, with participation from Binance Labs, Flow Traders, Trust Machines, and Asymmetric, among several other investors.

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