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As the desire for bitcoin liquid staking solutions intensifies, Nomic, the foundational blockchain that powers a non-custodial bitcoin bridge, is set to make a significant move. The team announced plans on Wednesday to introduce a bitcoin (BTC) liquid staking token to the Cosmos ecosystem, facilitated by an integration with the Bitcoin network’s staking protocol, Babylon.
What is COSMOS?
The Cosmos blockchain is designed to address key issues in the blockchain sector, such as interoperability, scalability, and ease of use. It utilizes the Inter-Blockchain Communication (IBC) protocol, allowing different blockchain networks to exchange information and value directly. This feature is useful for developers looking to create decentralized applications that operate across various blockchain systems.
Cosmos offers a modular framework that simplifies the process of developing custom blockchains suited for specific applications, enhancing performance. The well-known THORChain ecosystem, which has seen a lot of popularity in this recent bull run, is a project that runs on the Cosmos SDK (Software Development Kit) and is built for inter-chain operability.
What is Nomic?
Nomic is a layer-1 blockchain designed with a focus on interoperability and flexibility, aiming to serve as a foundational platform for a new generation of decentralized applications (dApps) and financial services. At its core, Nomic seeks to address some of the main challenges faced by existing blockchain infrastructures, such as scalability issues, high transaction costs, and limited cross-chain communication capabilities.
By leveraging advanced consensus mechanisms and a unique architecture that facilitates seamless interaction between different blockchain networks, Nomic aims to provide a more scalable, cost-effective, and user-friendly environment for developers and users alike. The platform’s commitment to interoperability is particularly noteworthy, as it enables the transfer of value and information across disparate blockchain ecosystems, thus broadening the potential for innovation within the decentralized space.
One of Nomic’s standout features is its adaptive protocol, which allows for on-chain governance and the ability for the network to evolve over time through community-driven upgrades and proposals. This approach not only ensures that Nomic can adapt to the rapidly changing landscape of blockchain technology and user needs but also empowers its community by giving them a direct stake in the network’s development and governance.
Furthermore, by prioritizing security, decentralization, and user experience, Nomic is poised to support a wide range of applications, from decentralized finance (DeFi) and non-fungible tokens (NFTs) to more complex, enterprise-level solutions. As the blockchain ecosystem continues to grow and diversify, Nomic’s innovative approach to interoperability and flexibility positions it as a potentially significant player in the future of decentralized technology.
What is Liquid Staking?
Liquid staking is an innovative mechanism within the cryptocurrency space that allows users to stake their digital assets in a proof-of-stake (PoS) blockchain network while retaining liquidity of their staked capital. In traditional staking, users lock up their cryptocurrency tokens to support network operations such as transaction validation and block production, in return for staking rewards.
However, once staked, these assets are often locked for a fixed period, rendering them illiquid and unusable for other purposes. Liquid staking addresses this limitation by issuing synthetic assets or derivatives that represent the staked tokens, which can then be used across various decentralized finance (DeFi) applications without unstaking the original assets.
The process works by users sending their tokens to a smart contract associated with a liquid staking provider. In return, they receive an equivalent amount of liquid tokens, often referred to as staking derivatives, which can be traded, used as collateral for loans, or utilized in other DeFi protocols. These liquid tokens are pegged to the value of the underlying staked assets and accrue staking rewards over time, reflecting the earnings from the staking process.
This mechanism ensures that users can participate in network security and governance while also engaging with the broader DeFi ecosystem, optimizing their capital efficiency.
Liquid staking not only enhances liquidity in the cryptocurrency market but also democratizes access to staking rewards by lowering the barriers to entry. Users with smaller amounts of capital can participate in staking activities that they might otherwise be excluded from due to minimum staking requirements or the illiquid nature of traditional staking. Furthermore, by facilitating broader participation in staking, liquid staking contributes to the security and decentralization of PoS networks.
Despite its benefits, liquid staking introduces complexities around the management of synthetic assets and regulatory considerations, underscoring the importance of understanding the mechanisms and risks involved in this innovative approach to staking in the blockchain ecosystem.
Liquid Staking on COSMOS
The concept of liquid staking tokens (LSTs) has seen a notable rise in popularity, with data from DeFiLlama revealing that, as of Tuesday, LSTs accounted for approximately $54 billion in total value locked (TVL), ranking them at the forefront of DeFi applications. This surge in interest is largely driven by the appeal of earning staking yields while engaging with DeFi protocols.
For those in the Cosmos network, this development means they can now stake their BTC via Nomic’s bridge, enjoying the benefits of yield earnings while maintaining liquidity of their assets. This is a departure from traditional BTC staking methods, which typically involve locking up assets for a determined period.
Introducing $stBTC, a Bitcoin Liquid Staking Token powered by @babylon_chain.https://t.co/b7duK3MBVs
— Nomic (@nomicbtc) April 10, 2024
Nomic’s strategy introduces an innovative way for users to leverage their staked BTC in DeFi protocols within the Cosmos ecosystem, thanks to the inter-blockchain communications (IBC) technology protocol of Cosmos. This technology enables seamless interactions between different blockchains within the ecosystem, such as performing transfers.
Under this new system, individuals staking their BTC on Nomic will receive rewards in both NOM, Nomic’s native token, and nBTC, an IBC-compatible token that mirrors BTC on a 1-to-1 basis. This setup not only offers BTC holders a novel avenue for yield but also utilizes stBTC and staked NOM to bolster the security of Nomic’s layer 1 blockchain.
Matt Bell, CEO of Turbofish and a key figure behind Nomic, highlighted the potential impact of such innovations, stating:
With innovations like stBTC emerging, Bitcoin DeFi now has the potential to compete with the trading volumes and total value locked of Ethereum DeFi.
However, the launch of stBTC on the mainnet remains pending, with the current phase limited to testing functionalities on Nomic’s test network, according to the team’s statement.
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