Deep Dives
Staking Circle
Staking Circle
Jun 5, 2024
8 min read

Exploring Bitcoin Staking w/ pStake

Exploring Bitcoin Staking w/ pStake

pStake Finance introduced their multi-chain liquid staking protocol, which is meant to manage several Layer 2s while providing a smooth user experience, including the simplicity of one-click staking.

Emphasis was given to long-term development and strategy, with pStake aiming to launch their Bitcoin Staking solution with Babylon. pStake Finance also intends to create a native governance token to reward early depositors during the open beta phase. Don't miss out on the details—dive deeper into the AMA highlights to learn more about this exciting developments.

X Spaces: Exploring Bitcoin Staking with pStake



  1. pStake & Bitcoin Staking
  2. Bitcoin Staking Explanation
  3. Mechanisms for BItcoin Staking
  4. Security and Risks and Bitcoin Staking
  5. pStake Token and Governance
  6. Security and Staking Environment
  7. Roadmap for BItcoin Staking
  8. Vision and Dedication for Long-term Growth

1. pStake & Bitcoin Staking

  • Mikhil described his journey in crypto, joining in 2019 and eventually falling in love with Bitcoin:

I'm just a normal human being who's passionate about DeFi, Bitcoin, staking, yields, and passionate about the space. So I started out in 2019 in the space officially and co-founded P-Stake

  • He explained his initial focus on yields and staking within the Cosmos ecosystem:

I'm just a normal human being who's passionate about DeFi, Bitcoin, staking, yields, and passionate about the space. So I started out in 2019 in the space officially and co-founded P-Stake

2. Bitcoin Staking Explanation

  • Mikhil talked about traditional views on Bitcoin and how Layer 2 solutions are enabling Bitcoin to become an active asset:

For the longest time nobody thought you could build anything on bitcoin ogs were so skeptical of anybody who wanted to build on bitcoin i think there were like a handful of teams trying to build anything meaningful on bitcoin

  • Explained that Bitcoin staking uses Bitcoin's economic value to secure other smaller chains:

The economic value of the Bitcoin to secure smaller chains that need economic security. So economic security is this concept that to attack a network

  • Bitcoin staking yields are paid in the form of the native tokens from the chain that's being secured, not in additional Bitcoin:

These yield comes from different chains providing you know some basically if you do a service for me I'm gonna pay you for it. It's the same concept where if you bring your BTC to stake and secure my chain I'm gonna have I'm going to have to pay you for it. I pay you in different forms, whether it's a revenue share or a portion of my inflation

3. Mechanisms for BItcoin Staking

  • Mikhil noted that when Bitcoin is staked, it is essentially locked up, creating issues similar to staking with Proof of Stake assets:

What they do is you use your Bitcoin, you put it into Babylon and Babylon is going to… you know, use those the dollar value of the Bitcoin to secure other chains, you earn some yields. But when you stake a Bitcoin, you have the same problem that you have with native staking of POS assets.

  • Introduced pStake's liquid token as a solution to address the issue of locked BTC during staking:

The problems that exist with staking kind of start appearing with btc staking as well although it's great that now you finally have yields on bitcoin but it's not the best because it's going to end up being locked up that's where we come in we do btc liquid staking

  • pStake accepts BTC deposits, stakes them, consolidates the yields, converts them into BTC, and gives them back to users, and issues a liquid token against the staked BTC:

Only difference is pStake is the one that is accepting BTC deposits and then depositing it into Babylon on behalf of the users. Whatever yields come, we convert them into BTC again and we send that back to the users who are depositing Bitcoin. So in a way, We do the depositing part, we do the consolidation of yields and return those yields to the users.

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4. Security and Risks and Bitcoin Staking

  • Mikhil highlighted security as a main concern due to the lack of advanced smart contract logic on the Bitcoin blockchain:

“_The Bitcoin network itself is not so advanced today that you could have interesting smart contract logics or anything like that. In today's context, the way most BTC sidechains work, for example, is you have to bridge your assets to these sidechains to do that. _”

  • He described the use of MPC wallets for securing BTC and the upcoming plans for insurance and coverage of the BTC in these wallets:

Pstake uses MPC, where we have three different signers who are going to sign transactions on behalf of the users to deposit the BTC into Babylon and issue the YBTC token. What is interesting though is we're going to go down the path of using insurance and coverage for all of these assets, so whatever asset. get put into the MPC wallet will be insured by certain third parties.

5. pStake Token and Governance

  • Mikhil explained pStake is a governance token for a protocol where pStake token holders decide all parameters:

So $PStake is the governance token for the protocol where all the parameters around the protocol are decided by P-Stake token holders

  • Decisions include how many incentives to give for starting traction on projects and products:

How many incentives are spent to bootstrap traction on certain projects, products are decided by P-Stake token holders. It's essentially the token holders that determine what happens within the protocol and how it grows.

  • Mikhil mentioned stakeholders are working on bringing more utility to the pStake token:

Obviously, there are other elements of the P-Stake token that a few… stakeholders are working on, which I'm sure will come to light very soon.

6. Security and Staking Environment

  • Mikhil noted that tokens don’t provide security, especially with a low market cap:

I don't think any token can actually end up providing security as such unless the token is a high market cap token which then has high economic security

  • Security issues with smaller chains and projects that rely on multi-sig based bridges were pointed out:

First of all, you don't have to rely on security assumptions from smaller chains, smaller projects, which have, you know, multi-sig based bridges, because if we shoot on a BTC L2 or a side chain, you're going to have to rely on.

  • Mikhil talked about issuing ELBTC tokens on Ethereum L1 for liquidity and security reasons instead of smaller chains or BTC L2:

So people argue that, okay, it's easier to attack the network. So, please take the dApp will exist across the Bitcoin network and Ethereum, where the ELBTC token will be issued. So we are instead of issuing it on a BTC sidechain or a BTC L2 which is what most people are trying to do today

unnamed.png (Source)

7. Roadmap for Bitcoin Staking

  • Mikhil shared plans to build using Bitcoin for the long term and wanted to maximize users' ability to earn from systems like Babylon's points:

What I want to do is go after real people who care about Bitcoin and generating yields on their Bitcoin. and make it sustainable over the long term. So one is using Babylon to stake. That's the first big part of our roadmap.

  • pStake’s short-term roadmap includes focusing on the Babylon release and ensuring pStake contributors can partake in any potential point systems and cap fills by pStake deposits:

One is like, really making sure so Babylon goes live, based on my knowledge and maybe speculation. They will not have any consumer chains or any AVSs that will be live at launch, which means they will be accepting deposits. Assuming they accept deposits with a cap, let's say they have a 50 mil, 100 mil cap of deposits in BTC, and assuming they have some point system like EigenLayer did

  • Long-term goals involve finding decentralized ways to generate yield on Bitcoin safely and preparing for potential Bitcoin network changes like OP-CADs:

We want to see how we can go beyond that and generate yield on people's Bitcoin in a secure manner, as safe as possible, getting multiple audits, getting audits of the infrastructure, and then working towards a longer term roadmap where you actually see Bitcoin network evolve. So you know, if Bitcoin network tomorrow is OP-CAD, how would you want to be positioned for that even before that happens?

8. Vision and Dedication for Long-term Growth

  • Mikhil expressed a constant commitment to building for the long term, focusing on both bull and bear markets without distraction from token volatility:

Four years ago to build and so has most of the team right so for us it's about like you know not caring whether it's a bull bear but just continue building the token is up down none of that all of that is a distraction obviously you want to be in a position where you can build for for multiple years multiple cycles that's why the treasury is important which we do have

  • They look forward to a relentless effort over the coming decades, with the team's youthful energy and dedication:

“_ It’s just about like building for an asset that you are excited about personally very excited about and you know you can see yourself building for a long time and then just go after it relentlessly over those decades_”

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