When I first explained stBTC to my friends, their reaction was very typical: "Oh, I understand, it's just another wrapped coin like wBTC, putting a shell around BTC on another chain." If you understand it this way, this article is for you—because in Lorenzo's design, the most important meaning of stBTC is not 'wrapping' but 'seat': it represents that you have occupied a native BTC staking seat on Babylon, with the principal locked in a specific UTXO, when it can be unlocked, and who it has provided security to during that time, all of which is backed by a complete set of on-chain records.
Let's start with a very specific story. Imagine you are Ah Hang, with 1 BTC in your wallet, lying idle in a cold wallet for years. One day, you open Lorenzo's page, ready to try 'native staking'. The front end asks you to choose a staking plan: lock for 90 days, providing security to a certain PoS chain through Babylon, with expected yields written on the right. After you press confirm, the wallet will issue a standard Bitcoin chain transaction—this transaction does not throw your BTC to a centralized institution, but uses Babylon's designed script to lock 1 BTC in a special UTXO. This UTXO has a time lock and staking conditions, and cannot be casually spent until several blocks in the future, while still retaining your control as the private key holder. Babylon's design is to use Bitcoin's native script + timelock to break down the 'staking contract' into a set of clear transactions and states, with the entire process happening entirely on the BTC main chain.
From this moment on, your 1 BTC in Babylon has a very specific identity: it is no longer 'a position that does nothing', but is registered as one of the security providers for a certain PoS network, and the protocol will allocate future rewards to you accordingly. At this layer, we can consider it as the 'staking seat layer'—who locked how much BTC at what height, delegated to which validators, and how long the staking period is, all written in the Bitcoin chain and the Babylon ledger, which anyone can track and verify.
How did stBTC come about? At this point, the Staking Agent in Lorenzo comes into play. It is responsible for monitoring Babylon and the Bitcoin chain. Once it confirms that your BTC pledge has taken effect according to the rules, it will upload the proof of 'successful pledge' to Lorenzo's own Cosmos Ethermint application chain. After the on-chain logic runs and verifies, it will mint 1 stBTC at your EVM address, corresponding one-to-one with the BTC you pledged. The official definition is very clear: stBTC is Lorenzo's main LPT (Liquid Principal Token), representing 'the principal rights of this BTC on Babylon's staking seat', not a rebase token that generates interest by itself.
So, to put it more straightforwardly: the 1 stBTC in your hand is actually a 'seat ticket' for that time-locked BTC UTXO in the Babylon staking pool. As long as you return this ticket to Lorenzo (burn stBTC) according to the rules in the future, the Staking Agent will follow Babylon's unlocking process to help you 'retrieve' that BTC from the time lock and return it to you through the inter-chain channel—in normal circumstances, this path is designed to be always close to a 1:1 redemption and is not diluted by the distribution of yields.
The real difference from 'wrapped coins' is that stBTC does not generate interest by itself; it only represents 'principal' and 'seating'. All yields are calculated separately. Lorenzo has designed a dual-token model above stBTC: the principal token LPT (which is primarily stBTC) and the yield token YAT (Yield Accruing Token). Each specific staking plan (BLSP) will have an estimable total reward pool. Lorenzo abstracts this portion of future yields into a batch of YAT, which is distributed to participants in this plan. Once the staking period ends, YAT can then return to claim the corresponding BTC rewards or equivalent assets. The principal and yield are completely separated, each with its own on-chain proof.
You can think of this entire relationship as a very simple 'personal mini balance sheet'. On the Bitcoin mainnet, you own a 1 BTC UTXO marked as 'staking' by Babylon; in the Babylon ledger, you have a seat for providing security to a certain PoS network; in your EVM address on the Lorenzo chain, you can see 1 stBTC (principal proof) and several corresponding YAT (yield proof). The rights on the stBTC side are 'at the end of the staking period, return my seat and give me back that BTC'; the rights on the YAT side are 'proportionally take my share from the reward pool corresponding to this pledge'. Anytime you open the block explorer, these three layers can correspond one-to-one.
Why do I emphasize that stBTC is not a wrapped coin? Because there are already enough crash cases in the world of BTC regarding 'wrapped' matters. The traditional wBTC model is to put real BTC into the address of a custodian, who then mints an ERC-20 token for you on the EVM chain. From that moment on, the 'BTC' in your hand essentially becomes an IOU, with the real coins held by the custodian. If the bridge gets hacked, the institution has issues, or regulations change, all risks are borne by that 'pipe' in the middle. Lorenzo's line, by design, aims to avoid putting everything in the hands of one bridge or centralized entity: BTC pledges happen on the main chain, relying on Babylon's scripts and time locks to ensure 'locked and unlocked'. The Staking Agent is responsible for bridging proof and issuing stBTC and YAT, while custody and auditing separate these layers of risk into different contracts and reports.
Back to the story of Ah Hang. After the pledge is completed, he has an extra 1 stBTC and a small amount of YAT in his wallet. For him, stBTC is like a numbered 'Babylon staking seat certificate': he can quietly hold it until maturity or use it as collateral on other chains, enter lending pools, or even participate in some perpetual trades to earn some extra liquidity yield; YAT is more like a 'prepaid interest ticket', its price fluctuates with market expectations for this staking plan. Ah Hang can hold it until maturity or sell it early to those who are more optimistic about this yield curve. When others ask him what this 1 stBTC is, he can clearly answer: it is not a shadow coin wrapped by a bridge, but the on-chain proof of my BTC's staking seat in Babylon.
Of course, by this point in the story, you might wonder: what steps should I actually focus on during the operation? My suggestion is to put the complex technical details aside and check three things for yourself. First, confirm that you can find the BTC UTXO corresponding to that pledge transaction and the Babylon record, clarify which time lock this BTC is currently in and what height it is expected to unlock. This is the basis for stBTC 'not being a wrapped coin'. Second, clarify which staking plan your stBTC corresponds to, how long the staking period is, and do not treat it as 'redeemable at any time' indefinite cash. Misjudging the duration is the first pitfall for many when making decisions. Third, understand which pool the YAT corresponding to this pledge came from, what assets you can receive in the future, and whether there is a possibility of designs like 'the yield is paid in other tokens'. After all, the principal and yield have been separated, and you need to monitor them separately.
When you have thought through these three things, and then look back at that string of 'stBTC price', 'stBTC discount', 'certain pool YAT annualized', they are no longer just cold figures, but become projections of your Babylon staking seat at different levels. At that point, you probably won't casually classify stBTC as 'another wrapped coin', but will be accustomed to introducing it in another way: this is my ticket for the staking seat in Babylon, the most fundamental and crucial brick in the entire BTCFi interest rate curve.
