LBTC FAQ

LBTC is a yield-bearing Bitcoin asset, combining an institutional off-chain yield strategy with yield denominated in Bitcoin and full composability across DeFi. LBTC targets a 2.5% APY, from off-chain covered-call options, strategy managed by Bitwise Investment Manager, LLC.  LBTC is deeply integrated as collateral across DeFi applications on 10 chains, allowing holders to earn yield and access liquidity. LBTC is secured by a multi-institution Security Consortium, and qualified custodians.

Yes. LBTC maintains identical properties and yield regardless of how you acquired it, whether purchased on a DEX or minted directly through Lombard.

Check the current APY and deployment progress at lombard.finance/transparency/lbtc. LBTC targets 2.5% net APY in BTC terms.

LBTC launched in September 2024 and is the largest yield-bearing Bitcoin asset in DeFi, with over $800M in current AUM and more than $3 billion in Bitcoin onboarded since launch. It holds a majority of the yield-bearing BTC market, operates across 10 chains (including Ethereum, Base, Solana, and Sui) and 50+ DeFi integrations, with zero security incidents since launch. The yield source is what changed in the transition. The token, the custody infrastructure, and the operating history behind it did not.

Three things. The yield source moved from Babylon staking to a covered-call options strategy managed by Bitwise Investment Manager, LLC. The custody arrangement for the actively deployed portion of the backing moved to qualified custodians under a tri-party agreement. And a transparency dashboard now publishes strategy metrics in real-time.

Everything else is unchanged: the token contract, mint and redeem logic, the cross-chain bridge, DeFi integrations, Proof of Reserve attestations, and the 10-day redemption window. No holder action is required, and no new KYC.

LBTC’s adoption has undoubtedly been hindered by the underlying yield source. While promising at one point, Bitcoin staking as a market has failed to develop, and staking yield as a result is unsustainable and likely to decline further. The promise of yield propelled LBTC to become one of the most successful DeFi assets ever, but with yield near zero, the primary mechanism for driving net-new Bitcoin onchain is gone.

Lombard selected this strategy for three reasons.

1. Covered calls are the established institutional approach to Bitcoin yield. Large asset managers, family offices, and HNWIs have used covered-call strategies to generate income on Bitcoin positions for years. LBTC brings that same access onchain, open to almost everyone.
2. The strategy’s track record is best in class. Four and a half years of legacy operating history, with positive historical returns in every calendar year.
3. This is one of the most scalable approaches to Bitcoin yield. Premiums for selling call options have existed throughout the history of equity, commodity and bitcoin markets. The strategy is not capacity-constrained by a protocol emission schedule or governance decision, it grows as Bitcoin markets grow.

No. Balances carried through the transition unchanged. There is nothing to migrate, claim, sign, or approve, and every existing DeFi position continues to work.

There is no opt-out switch. For 14 days until 27th August, all redemptions will be honored with no exposure to the underlying strategy.

Yes. The transition changed the source of future yield, nothing retroactive. The LBTC/BTC exchange rate carried through unchanged, yield earned under the Babylon model is already yours, and accrual under the new strategy continues from where the previous model left off.

No. Minting, redemption, secondary-market trading, and DeFi usage continued uninterrupted. The movement of Bitcoin into the new custody structure happened at the custody layer, in scheduled tranches, and never touched the token contract or the redemption mechanism. The 10-day redemption window applied exactly as before, with no transition-period gates or special conditions.

A covered call is a way of earning income from Bitcoin you already hold. Bitwise sells options, specifically, the right for another party to buy Bitcoin at a set price (the strike) by a set date. The buyer pays a premium upfront for that right. Bitwise collects those premiums, which accrue to LBTC holders as yield in BTC terms. The Bitcoin behind the option stays in Lombard’s segregated custody account at all times; it is not lent, transferred, or at risk from the strategy itself. Strikes are set well above where Bitcoin is trading, roughly 1.5 to 2 standard deviations above spot, so a significant upward move is required before they become relevant.

The yield mechanism is straightforward: covered-call options are sold on Bitcoin, counterparties pay real premiums for optionality on Bitcoin’s price, and those premiums accrue to LBTC holders at a targeted 2.5% net APY, through the appreciation of LBTC’s backing value.

No. All options are financially (cash) settled, so no Bitcoin leaves custody as a result of options activity. Lombard retains title to the Bitcoin at all times.

Every option written is fully covered by Bitcoin already held in custody, which is what the word “covered” in covered call means. There is no borrowing, no margin, and no position that a price move can force closed.

Typically 70 to 80% of the active allocation’s allocable capital is in live positions. The remainder is held as operational margin and liquidity, which is what gives the manager room to roll positions and reposition without being forced to close anything.

Bitwise holds discretionary trading authority only, within pre-defined risk parameters it cannot override. It can enter and exit options positions on the mandate, and nothing else. Its authority is bounded by daily risk limits on delta, gamma, vega, and single-strike concentration.

Lombard retains title to the Bitcoin at all times. Native Bitcoin sits in Lombard-owned, segregated, bankruptcy-remote custody accounts governed by market-standard tri-party agreements at Anchorage Digital Bank and Kraken Institutional, both qualified custodians under applicable US banking regulation.

Options are traded OTC at desks including FalconX, Kraken, and Anchorage, and settled financially, with no direct posting of collateral required by Lombard.

The 2.5% is not earned at the same level in every market condition, and it is a target, not a guarantee. Yield is variable and fluctuates with Bitcoin market conditions, implied volatility levels, and deployment levels.

No. Yield is reflected in the LBTC/BTC exchange rate automatically. There is no claiming step, no distribution event, and no governance token to manage or sell.

Yes. As the exchange rate increases, your LBTC is worth more BTC, and that larger amount continues to earn.

Bitwise Investment Manager, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission and is registered with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor. Bitwise Investment Manager, LLC is a wholly owned subsidiary of Bitwise Asset Management, Inc. (“Bitwise”), a global crypto asset manager with more than $9 billion in client assets. Since 2017, Bitwise has established a track record of excellence helping investors understand and access the opportunities in crypto. Bitwise manages a suite of over 70 investment products in the U.S. and Europe, spanning ETPs, index funds, alpha and SMA strategies, and staking solutions. The Bitwise team of over 175 technology and investment professionals is backed by leading institutional investors and has offices in San Francisco, New York, and London.

The covered-call strategy has a 4.5-year operating history. From 2022 through 2026 YTD, gross historical returns have been positive in every calendar year. The window includes the high-volatility stretches of 2022 but also sustained low-volatility stretches, notably the second half of 2023 and extended periods of 2025, when Bitcoin implied volatility sat at multi-year lows.

Bitwise has discretionary trading authority only. It can open and close options positions within the mandate and nothing else, and it has no authority to withdraw, transfer, or rehypothecate the Bitcoin. The BTC is not pooled with Bitwise’s own capital or other client mandates; it stays in segregated, Lombard-owned accounts throughout.

The hard risk limits are enforced daily and cannot be overridden by the manager. If Bitwise underperforms systematically, Lombard can terminate the mandate under the managed-account agreement, at which point the Bitcoin returns to Lombard’s full control and the liquidity buffer is unaffected the entire time.

LBTC’s backing operates across two distinct custody arrangements at all times.

The active allocation (target 50-60% of backing) is held at qualified custodians in segregated, Lombard-owned accounts under a tri-party agreement. Two custodians are in scope: Anchorage Digital Bank, the only federally chartered crypto-native bank in the United States (OCC national trust charter, and selected by BlackRock as a crypto custody partner in April 2025), and Kraken Institutional, a Wyoming Special Purpose Depository Institution (SPDI) that is required by statute to hold full reserves and segregate client assets.

The passive allocation (40 to 50% of backing) remains in Lombard’s existing decentralized Security Consortium custody, unchanged from the original design. Any protocol action requires signatures from at least 10 of the 14, and no single member (including Lombard) can act unilaterally. See Consortium Members for the full list. This allocation is completely isolated from the covered-call strategy: it earns no option premium and bears no strategy risk.

Lombard retains title to the Bitcoin at all times. Native Bitcoin sits in Lombard-owned, segregated, bankruptcy-remote custody accounts governed by market-standard tri-party agreements at Anchorage Digital Bank and Kraken Institutional, both qualified custodians under applicable US banking regulation.

Assets are not pooled with Bitwise’s proprietary capital or any other client mandate, and Bitwise has no authority to withdraw, transfer, or rehypothecate them.

Losses are contained to the active allocation, which is capped at 60% of backing. The passive allocation is structurally isolated: it does not participate in the strategy, shares no counterparty exposure with it, and remains available for redemptions regardless of what the options book is doing. Daily risk limits on the book restrict new positions when drawdowns exceed defined thresholds, and with no leverage in the strategy there is no forced-liquidation mechanism.

The 2.5% net APY target is the expected yield at full deployment. During the ramp, yield builds incrementally. In the pilot phase, APY will be materially lower than 2.5%; it approaches the target as deployment scales. The transparency dashboard displays current yield and deployment progress side by side, so they can always be read together, not in isolation.

Holders continue earning yield throughout the ramp, funded by BTC already accumulated in Lombard’s treasury. The yield is not zero; it is proportional to current deployment and runs below the 2.5% target until deployment reaches scale. Milestone communications are published at each deployment threshold so holders can see where in the ramp the strategy sits at any given time.

Market risk. A sharp BTC rally is the primary strategy risk: short call positions lose mark-to-market value when the price rises faster than the premium collected compensates for, and realized losses can occur when positions are rolled or closed. Losses in the Active Allocation could be substantial and could exceed the income the strategy has generated.

Volatility risk. A spike in implied volatility marks short option positions against the account even without a price move, and can increase the cost of adjusting or closing positions. Persistently low implied volatility reduces premium income and may cause returns to fall below target.

Counterparty risk. Options trade over-the-counter under bilateral trading documentation with institutional counterparties. A counterparty default or insolvency could result in losses, including amounts owed on open positions, and close-out rights may be delayed or limited in an insolvency. Concentration among a limited number of counterparties increases this risk.

Custody and digital asset risk. Custodian operational failure, insolvency, cyber events, or compromise of private keys could result in loss of assets, and digital asset transactions are generally irreversible.

Liquidity risk. OTC options markets can become thin or one-sided, particularly during stress. It may be costly, or temporarily not possible, to close, roll, or adjust positions, and wide spreads can increase transaction costs.

Manager and operational risk. The strategy is discretionary. Judgment errors, trade or booking errors, model limitations, or system and communication failures can result in losses to the account, not merely reduced income.

The strategy is managed within a defined risk framework:

Position and exposure limits. Hard caps apply to net delta, vega, gamma, and single-strike concentration. Options tenor is primarily 6–8 weeks, with a maximum of 6 months.

Daily monitoring. Greek exposures and book composition are monitored daily against the mandate’s target and breach bands, with defined response protocols when exposures approach limits.

Position management. The manager actively rolls and re-strikes positions and uses defined-risk spread structures. In low-volatility regimes where premium does not compensate for the risk, deployment is reduced rather than accepting thin premium.

Custody and asset segregation. BTC in the Active Allocation is held in Lombard’s segregated accounts at qualified custodians. The manager’s authority is limited to executing options trades within the mandate; neither the manager nor any counterparty can unilaterally withdraw or transfer assets. Collateral moves only under tri-party agreements.

Counterparty framework. Counterparties are vetted and monitored on an ongoing basis under the manager’s institutional counterparty risk framework, and trading is conducted under standard institutional documentation.

The full picture is on the Risks page and in the Risk Disclosures.

It is public, at lombard.finance under transparency. No wallet connection, login, or account is required to see current yield, deployment progress, and the full set of strategy metrics. See Transparency Dashboard.

Individual trade lines are not disclosed; they are the manager’s proprietary execution, and publishing them in real time would degrade pricing against counterparties.

No protocol-level changes were required anywhere. The token contract, oracle setup, and collateral behavior are unchanged, and existing integrations continue to function without modification. Independent risk curators conducted their own due diligence on the transition and confirmed that existing listings are maintained. Those assessments are independent of Lombard.

No. No new KYC is required of any holder.

No. Proof of Reserve attestations continue on their existing schedule and oracle infrastructure. Active allocation assets are accounted for at the protocol level and reflected in the attestations.

The Protocol rewards fee applies only to gains generated by the covered-call options strategy, above the strategy’s previous peak. The passive allocation is never charged, and if the strategy generates no gains, no fee is charged. For detailed fee information, see LBTC Fees.

It means the strategy has to recover any drawdown before the fee starts again, so the same gain is never charged twice.

No to both. There is no Protocol operating fee at all. The passive allocation, the 40 to 50% of backing that sits outside the strategy earning nothing, is never charged a fee of any kind. Fees touch only gains, only on deployed capital.

1. Navigate to lombard.finance/app/stake
2. Connect destination wallet
3. Send BTC to generated address
4. Await 6 Bitcoin confirmations (about 40 to 60 minutes)
5. LBTC mints automatically

The minimum is approximately 0.0002 BTC, with no maximum limit.

LBTC is yield-bearing, so 1 LBTC is worth more than 1 BTC. You receive the correct BTC-equivalent value.

If you minted on Ethereum, a small amount of LBTC is deducted to cover gas costs. Other chains have no minting fee.

When BTC is deposited to Lombard protocol derived addresses, it is important to make sure UTXOs are not spent if they are related to Ordinals. Users should employ separate wallets or manual UTXO selection to prevent irreversible loss.

1. Access lombard.finance/app/unstake
2. Input LBTC amount
3. Provide Bitcoin withdrawal address
4. Confirm transaction
5. Wait up to 10 days for BTC arrival

The process can take up to 10 days, covering Lombard’s redemption and rebalancing cycle. Redemptions are funded from the passive allocation.

The passive allocation (40 to 50% of backing) is sized so that redemptions rarely touch the active allocation at all. If a redemption wave exceeded it, the shortfall is met by reducing active allocation positions in an orderly way. Positions are laddered across expiry dates with exactly this contingency in mind, and the 10-day window provides the operational runway.

0.00013300 LBTC (includes 0.0001 LBTC network security fee).

Switch address types (Native SegWit or Taproot) within wallet settings.

Check your transaction on a Bitcoin block explorer. If confirmations are complete and LBTC has not minted, check the Activity page to mint manually.