Yield
LBTC generates yield by putting your Bitcoin to work securing other blockchains. This page explains where the yield comes from, how it reaches you, and how you can stack additional yield through DeFi.
Where Yield Comes From
LBTC yield comes from Bitcoin staking through the Babylon protocol. When you hold LBTC, your underlying Bitcoin is actively securing Proof-of-Stake networks called Bitcoin Secured Networks (BSNs).
Here's how it works:
Bitcoin provides security. BSNs are blockchains that use Bitcoin as their economic security layer. Instead of relying solely on their native token for Proof-of-Stake security, they tap into Bitcoin's massive capital base. This makes them significantly harder to attack.
BSNs pay for that security. Networks want Bitcoin security because it's valuable. They pay for it in their native tokens — similar to how Ethereum validators earn ETH for securing Ethereum.
Rewards flow back to stakers. Those payments are converted to BTC and distributed to everyone who staked Bitcoin through Babylon. For LBTC holders, this means the value backing your tokens increases over time.
This is native Bitcoin yield — not from lending, not from liquidity mining, but from providing genuine economic security to blockchain networks.
How Yield Reaches You
LBTC uses a non-rebasing model. Your token balance stays the same, but each token becomes worth more BTC over time.
The Exchange Rate
When LBTC launched, the exchange rate was 1:1 — one LBTC was redeemable for exactly one BTC. As staking rewards accumulate, that rate gradually increases.
If you minted 10 LBTC when the rate was 1.0, you deposited 10 BTC. A year later, if the rate is 1.01, your 10 LBTC is now redeemable for 10.1 BTC. You earned 0.1 BTC in yield without doing anything.
Why Non-Rebasing?
The alternative is rebasing, where you'd receive additional tokens as yield accrues. Non-rebasing has practical advantages:
Simpler accounting. Your balance never changes unexpectedly. If you hold 10 LBTC, you always hold 10 LBTC.
Better DeFi compatibility. Many DeFi protocols don't handle rebasing tokens well. Non-rebasing LBTC works seamlessly with lending protocols, DEXs, and other applications.
Automatic compounding. Yield is continuously reinvested into the exchange rate. No claiming, no restaking, no gas fees.
Yield Distribution
Yield doesn't distribute at fixed intervals. Instead, the exchange rate updates continuously as rewards from BSNs accumulate in the protocol. The rate you see reflects all accumulated yield up to that moment.
The Yield Stack
Beyond base staking yield, you can earn additional returns by deploying LBTC in DeFi. This creates yield stacking — multiple yield sources compounding together.
Base Layer: Babylon Staking
Every LBTC holder earns this automatically. Your underlying BTC is staked through Babylon, securing BSNs and generating yield. No action required — just hold LBTC.
DeFi Layer: Additional Yield
You can deploy your LBTC across DeFi to earn on top of base staking yield:
Lending: Supply LBTC to Aave, Morpho, or other lending protocols. Earn interest from borrowers while your LBTC continues appreciating from staking yield.
Liquidity provision: Add LBTC to DEX pools on Uniswap, Curve, or others. Earn trading fees plus any liquidity mining rewards. The base staking yield helps offset impermanent loss.
Vaults: Deposit into the Lombard DeFi Vault for automated yield strategies across multiple protocols.
Restaking: Deposit LBTC into restaking protocols like EigenLayer or Symbiotic to earn additional rewards from securing more networks.
Incentive Layer: Points and Rewards
Many protocols offer additional incentives for LBTC deposits:
Lux rewards: Lombard's points program rewards holding and deploying LBTC with BARD token allocations.
Protocol incentives: DeFi protocols often incentivize LBTC liquidity with their native tokens or points programs.
These incentives can significantly boost total returns, though they vary by protocol and change over time.
Yield Considerations
What Affects Yield
BSN demand: More networks wanting Bitcoin security means more rewards for stakers. As the BSN ecosystem grows, yield potential increases.
Total staked BTC: Yield is distributed across all staked Bitcoin. More competition means lower yield per BTC, though this is balanced by growing BSN demand.
Finality Provider performance: Lombard delegates to institutional Finality Providers (Figment, Galaxy, Kiln, P2P.org) who take an 8% commission on rewards. Their uptime and performance affects your yield.
Yield vs Risk
Higher yield opportunities generally come with additional risk:
Base staking: Lowest risk within the LBTC ecosystem. Subject to slashing risk (0.1%) and smart contract risk, but no additional DeFi exposure.
DeFi deployment: Higher potential returns, but adds smart contract risk from each protocol you use. Lending has counterparty risk, LPing has impermanent loss risk.
Vaults: Convenient yield optimization, but you're exposed to risks from every protocol the vault uses.
Choose your yield strategy based on your risk tolerance, not just the highest advertised APY.
Next Steps
Bitcoin Vaults — Automated yield strategies
Lux Rewards — Earn BARD tokens for holding LBTC
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