Understanding Yield
Your LBTC earns Bitcoin yield automatically. There is nothing to claim and no action to take, the value of your LBTC in BTC terms is designed to increase over time.
The yield comes from an institutional covered-call options strategy managed by Bitwise Investment Manager, LLC., against a portion of the Bitcoin that backs LBTC. It is real market income, denominated in Bitcoin. LBTC targets 2.5% net APY in BTC terms at full strategy deployment. That is a target, not a guarantee, it is variable, and during the initial deployment ramp it runs below target and builds as the strategy scales.
How Yield Reaches Your Balance
Yield does not appear as a payout. It accrues to the protocol as additional Bitcoin, and that additional Bitcoin is expressed in the LBTC/BTC exchange rate, so the same LBTC comes to represent more BTC over time.
The Exchange-Rate Model
When LBTC launched, 1 LBTC = 1 BTC. As yield accumulates, the exchange rate increases. The table below is illustrative at the 2.5% net APY target:
| Time | Exchange rate | 1 LBTC redeems for |
|---|---|---|
| Launch | 1.0000 | 1.0000 BTC |
| +30 days | 1.0021 | 1.0021 BTC |
| +6 months | 1.0125 | 1.0125 BTC |
| +1 year | 1.0250 | 1.0250 BTC |
Illustrative only, at the 2.5% net APY target. Actual APY is variable and not guaranteed, with losses possible. Yield is shown in-app as a trailing figure. During the initial deployment ramp, yield runs below the target and builds as the strategy scales toward full deployment.
What this means when you mint and redeem
When you mint: you receive slightly less than 1 LBTC per BTC deposited, because 1 LBTC is already worth more than 1 BTC. At a 1.0050 rate, depositing 1 BTC gives you about 0.9950 LBTC.
When you redeem: you receive the full BTC value of your LBTC at the current exchange rate, funded first from the liquidity buffer, within a redemption window of up to 10 days.
Worked example: deposit 1 BTC when the rate is 1.0050 and you receive ~0.9950 LBTC. Redeem later when the rate is 1.0100 and you receive ~1.0050 BTC, a gain of 0.0050 BTC. The token count barely changed, the Bitcoin it represents grew.
What Drives the APY
LBTC’s yield is not a fixed rate. It is the output of a live covered-call options strategy, so it moves with market conditions and with how much of the backing is deployed. Three factors dominate.
Check the current figure and deployment progress at lombard.finance/transparency/lbtc . It will show daily and historical risk metrics cryptographically signed, comprehensive yield data, full Proof of Reserve, and a detailed custody and deployment breakdown.
The Deployment Ramp
Deployment runs in tranches: a small $10 million pilot in the week of 17 August to validate custody, oracle feeds, and dashboard integrity, then gradual increases across following weeks, with the full active allocation (50–60% of TVL) in September. Variable yield builds as the active allocation scales. In the early weeks of transition, LBTC’s yield will be below the 2.5% target as deployment progresses. The transparency page shows current yield and deployment progress side by side.
Compounding
Yield compounds automatically, with no action from you. Because yield accrues by raising the LBTC/BTC exchange rate, every increment of new Bitcoin is measured against a growing base. Once the exchange rate rises, your LBTC is worth more Bitcoin, and that larger Bitcoin amount is what continues to earn. There is no separate reward token, no claim transaction, and no compounding schedule to manage, it is built into how the exchange rate works.
Stacking Yield: Base Plus DeFi
The covered-call strategy is LBTC’s base yield, earned automatically wherever your LBTC sits. You can layer additional, opt-in yield on top by putting LBTC to work in DeFi.
These stack. LBTC keeps earning its base exchange-rate yield even while it is deposited in a DeFi protocol earning more on top. See Access DeFi for where to deploy.
Yield Model History
| Date | Event |
|---|---|
| Before July 22, 2025 | Users claimed BABY, Babylon’s staking reward token, manually from the Lombard app |
| July 22, 2025 | All yield became auto-compounding through the LBTC/BTC exchange rate |
| 2026 | LBTC’s yield source transitioned from Babylon staking to the Bitwise-managed covered-call strategy |
Any BABY you did not claim before July 22, 2025 was redistributed to LBTC holders automatically. Yield accrued under the previous model is preserved: the transition changed the source of future yield, not anything retroactive. No holder action was required, the token contract, mint and redeem logic, cross-chain bridge, and redemption terms all carried through unchanged.
Note: Yield figures are targets, not guarantees. Returns are variable and past results are not necessarily indicative of future results. See Terms and Risk Disclosures. The yield strategy and direct mint and redeem are not available to US or UK persons or other restricted jurisdictions.
Frequently Asked Questions
Next Steps
- Fees, the full cost structure behind the net yield
- Yield, where the covered-call strategy fits in LBTC’s full yield stack
- Yield Strategy, strike selection, custody, counterparties, and risk limits
- Access DeFi, deploy LBTC for additional yield on top of the base strategy
- FAQ, more questions about LBTC