Original title: Exploring Lombard, Corn, and Pendle
Original author:Thlither
Original source: https://www.onchaintimes.com/
Compiled by: Mars Finance, Eason
A Comprehensive Guide to Maximizing Yields and Taking Advantage of Multiple Airdrops on LBTC Farms
Introduction
A few years ago, if you held a large amount of native Bitcoin and wanted to use it in DeFi and earn a yield, your options were very limited - among the few liquid, 1:1 backed Bitcoin protocols, Wrapped Bitcoin (WBTC), with a circulation of about 285,000 BTC, might be your best bet. While WBTC is relatively reliable, it is not a yield asset and does not provide much on-chain utility beyond basic uses such as liquidity provision (LP) and lending. Despite this, its dominance has not been greatly challenged since its launch in 2019.
A lot has changed since then. Last summer, BitGo announced that it was transitioning its sole legal custody of WBTC to a joint venture with BiT Global, a company with ties to Justin Sun and Tron. This surprise change sparked the launch of multiple new challengers to the WBTC empire, including cbBTC from major players like Coinbase. Among these new entrants, one in particular caught my attention: Lombard Finance. Their new Liquid Bitcoin product, LBTC, represents a new way to use Bitcoin in DeFi. Today, I’ll tell you what it is, how it works, what kind of utility it has, and how you can use it to farm multiple airdrops simultaneously.
Key Points
Lombard与Babylon
Delicious corn
Pendle Party
Airdrop Tips and Proper Farm Maintenance
Try to calculate daily points and return on investment (ROI)
An interactive calculator is included at the bottom of the article
Lombard与Babylon
To understand LBTC, let's first take a brief look at Babylon, Lombard, and how they work together to produce a token that can be used in DeFi. Babylon is a protocol that provides Bitcoin timestamping (using BTC to back up PoS chain data) and staking (using BTC to provide decentralized economic security), which provides the backend engine for Lombard. Although Babylon has not yet delegated its staking, they plan to go live soon, by which time they will generate income for Bitcoin holders, with the goal of becoming Bitcoin's Eigenlayer.
That’s awesome, but if you want to use that staked Bitcoin elsewhere, you’ll need Lombard and its flagship liquid staking token, LBTC. Here’s how it works: first, you connect your Ethereum wallet to Lombard and stake your Bitcoin — to receive it, Lombard gives you a Bitcoin address — and when you send Bitcoin, your Bitcoin is re-staked to Babylon, and Lombard mints you a corresponding amount of LBTC on Ethereum L1. Babylon keeps track of your BTC stake, and Lombard gives you a composable DeFi liquid receipt token. When Babylon’s validator service goes live, LBTC will even earn revenue from the staking services provided by its underlying BTC. Here’s a summary so far:
Stake BTC to Lombard
BTC is re-collateralized to Babylon, managed by a group of trusted parties called a security consortium
Minting LBTC through Lombard (issued on ETH L1)
When you want to exit the ecosystem, simply send your LBTC back to Lombard to be destroyed, at which point Babylon will be prompted to unstake your Bitcoin. To simplify this process, Babylon uses unspent transaction outputs (UTXOs) to lock and unlock Bitcoin from self-custody and a combination of conditional data to verify the recipient. As I said, it's very simple!
If you want to learn more about their vision for growth, the staking/unstaking process, and the security consortium, check out Lombard’s documentation. For those who want to read a 15-page technical brief on how Babylon Staking works, feel free to check it out.
Since its launch on August 22, LBTC’s total locked value (TVL) has experienced steady growth, quickly climbing to over 5,900 BTC, or about $373 million. In comparison, this is still only about 3.6% of the size of WBTC!
Here's a link to Lombard's Dune page
So, now you understand how Lombard works, and have just minted enough LBTC to buy an island (or maybe a Happy Meal). What’s next?
Delicious corn
As Babylon and Lombard build new foundations for using Bitcoin on-chain, many other players are developing specific applications for Bitcoin to take advantage of the growth of this new space. Corn is a new Ethereum layer 2 solution designed to provide the best yield, leverage, and liquidity for Bitcoin in DeFi - a one-stop service platform where you can put your newly acquired liquid Bitcoin to work. Today, Corn is basically just a way to increase your airdrop multiplier (more on this later), but stay tuned as they continue to launch yield products for LBTC.
At a recent X Spaces event, where the founding members of Lombard, Babylon, Corn, and Pendle participated in the discussion, Corn's co-founder briefly talked about the competition between Bitcoin and Ethereum. He said that only in the past year have people from both camps begun to work together to build a reliable EVM-based DeFi ecosystem to serve people who hold a large amount of native Bitcoin. To achieve this goal, they obviously need to incentivize growth, and as any emerging project does, they turned to everyone's favorite yield tokenization engine - Pendle.
Pendle Party
Pendle is a protocol that allows traders to buy fixed income (PT) or speculate on points (YT) in a leveraged manner. Since Pendle has been discussed in detail in On Chain Times, I will not go into detail about how it works, but here is a previous post I wrote that explains it more fully.
After seeing the benefits of the Eigenlayer ecosystem, Pendle did not hesitate to go all-in on BTCfi. The combination of Eigenlayer, LSTs, and Pendle YT has reshaped the DeFi landscape, and now Bitcoin staking is trying to reapply this successful strategy.
Apparently, this approach is working, as trading volume has exceeded $25 million in less than two weeks!
I’ll get to YT in a moment, but first let’s talk about some other Pendle operations that look very attractive:
1.LP-LBTC
Provide liquidity while keeping some points, earning pool income and $PENDLE rewards
~29.46% Annualized Rate of Return (APY), ~7.51% Return on Investment (ROI, floating)
The pip exposure to Lombard/Corn is about 90% vs. LBTC
Side note - I’m in this pool and can confirm the APY has been closer to max than base most days
2.PT-LBTC
7.919% annualized rate of return (APY), 2.02% return on investment (ROI, fixed, must be held until maturity to be realized)
That’s a pretty good return, but it could be better…
3. PT-LBTC + Zerolend Cycle
Supply PT into the protocol, borrow more LBTC, and then reuse more PT
Achieve up to 10x leverage through looping = 79.19% APY, 20.2% ROI
Maximum loan-to-value ratio (LTV) 90%, liquidation threshold 95%, supply APY 2.89% / borrow APY 4.06%
For those who want to keep some real gains, these three options with different risk levels and timelines are great. But that’s not what you’re here to hear. Let’s talk about how to get points from the combination of these programs.
Maintaining the Farm
A quick note before we get into the farm - since no Lombard deposits are currently earning Babylon points, I will not include it in my analysis here. The founder of Babylon recently stated on X that LBTC will start earning points after the next round of limit increases, so be patient. All strategies discussed will eventually earn Babylon points since they all use LBTC.
That being said, let's analyze Corn and Lombard's activities, and a few ways to farm them:
Lombard Lux
LBTC
Once you mint LBTC, you will start earning Lombard points, called Lux, at a rate of 1,000 staked Bitcoins per day. In other words, a user who stakes 0.01 Bitcoin for 1 day will earn 0.01*1000 = 10 Lux. The campaign started on August 22 and is expected to last until the end of Q4 or early Q1 (my guess).
DeFi Integration
Lombard wanted to provide LBTC holders with a wide range of integration options, and they did. Users can deposit into Lombard's own LBTC/wBTC vault, which leverages automated DeFi strategies to generate a 3% annualized yield (APY) and earn 4x Lux, or choose to earn through multiple blue-chip partners such as Morpho, Symbiotic, Uniswap, and Curve. Depositing funds into these vaults is a great way to choose exposure to specific types of points. Currently, more than $344 million of LBTC (about 92% of the total locked value) is being used in DeFi.
Pendle
YT-LBTC positions held on Pendle will automatically earn 3x Lux, in addition to the natural leverage provided by YT (currently about 48x price leverage). So in total, these YTs earn pips at a rate of about 145x, compared to just 1x for bare LBTC.
Lombard DeFi Opportunities page
Corn Kernels
Silos
Corn is currently in the second phase of its airdrop campaign, with the first phase allocating points for completing tasks in the early access list. In the second phase (announced on August 22), users can earn Corn points (called Kernels) by depositing LBTC (or other assets) into Corn's Silos (funding pool). Kernels accumulate at a rate of 1 Kernel every 3.5 hours for every $1 deposited (about 6.85 per day), and can be multiplied up to 3 times. Users who deposit LBTC will earn Kernels at a rate of 1.5x.
Reference + Galxe
Invite your friends and you will get 20% of the Kernels earned by the first referrer, 12% by the second referrer, 6% by the third referrer, and 4% by the fourth referrer. Each Galxe point earned by completing Corn's tasks is also equal to 1 Kernel.
Pendle
Similar to Lombard Lux, Pendle’s YT-LBTC earns Kernels at a 3x rate and has the same ~48x price leverage, providing ~145x total pip exposure per USD.
Corn Pendle integrations + Silos
(Very) Speculative Calculator
Assumptions
I used a spot Bitcoin price of $63,200 to calculate the daily points for September 23, 2024.
As I mentioned before, I am not including Babylon Points here, although LBTC will eventually earn them. Babylon Points will improve the return on investment (ROI) of both strategies discussed.
The ROI calculator assumes you entered the Corn and Pendle pools on their respective launch dates.
I used a consensus snapshot date between late Q4 and early Q1, assuming these projects will airdrop in a similar timeframe. Also assuming an industry standard 5% airdrop.
The "token FDV" in the ROI chart refers to the FDV of each token, not the combined FDV. I also speculate on a fairly large bullish price swing (reflected in the FDV).
Therefore, the $1 billion column means that Corn and Lombard’s future tokens each have a FDV of $1 billion.
I'm assuming an overall daily growth rate of about 6x between now and March for my Lux/Kernel volume forecasts.
One more important note: Lombard Lux is denominated in Bitcoin (like Eigenlayer points), while Corn Kernels are driven in USD, which means that if the price of Bitcoin increases, the Kernels yield for a given LBTC position will also increase. I am not taking into account future Bitcoin price changes here, so if you are particularly bearish or bullish on the current price action, take that into account.
Daily Points Calculation on September 23, 2024
LBTC Corn Silo vs Pendle YT - Return on Investment (ROI) of LBTC
Daily Kernel/Lux earnings assume $1000 capital invested
Summary
That’s it. Today, in 2024, as a native Bitcoin whale, you can no longer say that WBTC is the only real option for using your coins in DeFi. Lombard, Babylon, Corn, and Pendle are four key players that are driving a new movement in Bitcoin usage on-chain. Whether stacking multiple types of points with YT leverage, collecting passive income through Silos or Vaults, or some combination of the two strategies, LBTC undoubtedly provides value and seems to be here for the long haul.
As we head into the fall and winter, keep an eye on the total value locked (TVL) growth for both protocols - I expect Lombard to stay ahead of competitors like cbBTC in new deposits, and Corn to start growing its ecosystem and continue to participate in new Pendle market launches. Regardless, it’s an exciting time for Bitcoin in DeFi going forward.
calculator
You can access the calculator by becoming a free subscriber to On Chain Times.
If you want to try different YT/Bitcoin prices, position sizes, and entry dates, here is a more in-depth YT-LBTC calculator where you can edit the fields. Happy farming!
