Bitcoin Liquid Staking
Last updated
Last updated
Bitcoin Liquid Staking
Omnibit’s Bitcoin Liquid Staking protocol enables Bitcoin holders to stake their BTC, contributing to the economic security of PoS networks without relinquishing liquidity. By locking Bitcoin through non-custodial UTXO scripts or institutional-grade custodian wallets, users can mint oBTC, a liquid staking token that represents their staked Bitcoin.
This protocol:
Allows Bitcoin to actively secure PoS blockchains while maintaining decentralised trust.
Provides Bitcoin holders with liquidity through oBTC, enabling them to trade, stake, or use it across DeFi protocols.
Establishes Bitcoin as a foundational security layer for decentralised systems.
How Bitcoin Liquid Staking Works
This diagram illustrates a comprehensive Bitcoin staking and liquid tokenisation system connecting the Bitcoin network to a Proof-of-Stake (PoS) ecosystem via secure non custodial programmable transactions. The system begins with BTC deposits, which can be made either independently or through institutional-grade custody services. These deposits are locked under specific conditions, such as timelocks and EOTS (Enforceable one-time siganutres). The UTXO Lock Script Vault or 'Bitcoin Staking Contract' acts as a means of shared economic security to POS Validators.
The Scribe module serves as a critical auditing and communication mechanism between the Bitcoin network and the Proof-of-Stake (PoS) network. Its primary role is to timestamp, record, and verify validator activity and the state of the PoS network while ensuring consistent and provable interactions between the two systems. This process guarantees that oBTC remains accurately minted and backed by staked BTC, and that funds in the UTXO Lock Vault are managed according to security protocols.
Meanwhile, the Reporter module relays information to the Omnibit State Verification Layer, which authenticates the locked Bitcoin balances, timestamps, and overall state integrity for the Scribe module. Once verified, this information flows from the PoS validators to the scribe module to enable POS validator sets to utilise Bitcoin as additional economic security to strengthen the PoS network. Validators earn rewards, and a Slashing Module penalises any validators exhibiting malicious or negligent behaviour both on the POS network and within the UTXO lock vault on on the BTC network, safeguarding the system's integrity.
On the PoS side, a specialised oBTC Issuance Smart Contract mints oBTC tokens in a 1:1 ratio to represent the staked Bitcoin locked within the UTXO Lock Vault. This smart contract operates via the Bascule Bridge, a security-first drawbridge mechanism that ensures accurate and verifiable communication between the Bitcoin network and the PoS network. The bridge leverages decentralised watcher nodes to monitor Bitcoin deposits and generate cryptographic proofs of the staked assets. These proofs are submitted to the PoS network, ensuring that all oBTC minted is transparently backed by BTC.
The oBTC tokens, once minted, can be used across DeFi protocols, enabling participants to earn additional yields while maintaining their Bitcoin's representation in the staking ecosystem. Advanced modules, such as the AI Rebasing Module, dynamically manage the minting or burning of oBTC based on network conditions or user activity, ensuring optimal utility and liquidity for oBTC holders.
This system achieves seamless and trustless interaction between the Bitcoin and PoS ecosystems by combining:
Verifiable cross-chain security through cryptographic proofs and timestamped state verifications, managed by the Omnibit SVL (State Verification Layer).
Resilience to slashing and bad actors, enforced by consistent monitoring and validator accountability protocols.
Transparent token backing, with each minted oBTC reflecting an auditable BTC stake on the Bitcoin network.
(Bascule is inspired by the excellent analysis done by UCSD’s Alex Enze Liu in Count of Monte Crypto: Accounting-based Defenses for Cross-Chain Bridges. https://arxiv.org/abs/2410.01107 - Cubist)
Topic
Feature
Description
Economic Security for PoS Networks
Leverages Bitcoin’s Market Capitalisation
Allows PoS blockchains to significantly scale their security budgets by incorporating Bitcoin’s immense value as an economic security layer.
Dynamic Integration
PoS validators can use oBTC to stake directly, enhancing decentralisation and the overall security of the network.
Reduced Centralisation Risks
Trustless, non-custodial mechanics minimise reliance on single points of failure, strengthening decentralisation.
Liquidity for Bitcoin Holders
oBTC as a Liquid Token
Unlike traditional staking, which locks assets indefinitely, oBTC is freely tradable, stakeable, or usable as collateral within DeFi protocols.
Yield Opportunities
Enables Bitcoin holders to earn staking rewards while leveraging their oBTC in additional yield-bearing strategies, maximising utility and returns.
Trustless and Transparent Design
On-Chain Verifiability
Every deposit and minting event is transparently recorded on-chain, ensuring trust and auditability for users and validators.
Advanced Cryptographic Security
Utilises zero-knowledge proofs and other cryptographic tools to guarantee the privacy and security of user deposits during cross-chain operations.
Advancing Bitcoin’s Role in Decentralisation
Omnibit’s Bitcoin Liquid Staking Protocol transforms Bitcoin from a static store of value into a dynamic security layer. By enabling Bitcoin holders to participate in PoS ecosystems, the protocol bridges the gap between Bitcoin’s unparalleled security and the scalability and innovation of modern blockchains.
Through:
Non-Custodial Staking: Empowering users with full control over their Bitcoin.
oBTC Liquidity: Providing a seamless gateway into DeFi and staking opportunities.
Economic Security: Reinforcing PoS networks with Bitcoin’s decentralised power.
