We are not discussing how to 'earn' more Bitcoin; we are talking about how to 'spend' Bitcoin—without selling it.
As a veteran in Bitcoin, the most painful moments often aren't when the price drops, but rather when you urgently need money in life or see other investment opportunities, yet have to painfully sell your BTC for liquidity. The feeling of selling out can only be understood by those who have experienced it. In traditional views, Bitcoin is a 'store of value'; these four words are like a spell that locks it away.
But the Lorenzo Protocol showed me a new possibility: it is trying to awaken Bitcoin's attributes as a top-tier collateral, which is its 'credit value'.
Have you ever thought about why houses are one of the best assets in the world? Besides being a place to live, more importantly, they can serve as collateral to allow you to borrow money from banks at low interest. Your house is still there; you haven't lost the benefits of rising house prices, but you have cash flow in hand.
In theory, Bitcoin should be a better collateral than a house—it circulates globally, is easy to divide, and cannot be forged. But the problem is that native Bitcoin is 'not usable' in the DeFi world. The UTXO architecture makes it difficult to smoothly enter lending protocols like ERC-20 tokens. We used to use WBTC, but that essentially means trusting the custodial institution's integrity; centralized risks always hang over you like the sword of Damocles.
Lorenzo's stBTC perfectly fills this ecological niche: it is a decentralized collateral with self-funding capabilities.
There is a very attractive play here called self-repaying loans.
Let's do the math: Suppose you go to a regular DeFi lending platform, collateralize BTC, and borrow USDT; you might have to pay 5%-10% in borrowing interest annually. This interest is pure expense; if the coin price doesn't rise, you're at a loss.
However, if you use Lorenzo's stBTC as collateral, the situation changes completely. Because stBTC itself is earning underlying staking returns (like 5%) through Babylon. This means that the returns generated by your collateral might directly cover the interest costs of borrowing.
It's like buying a house, using the house as collateral to get a loan for a car, and then renting out the house to repay the car loan. Your principal (Bitcoin) is still there, you enjoy the future appreciation potential of Bitcoin, you have cash flow now, and you hardly need to pay interest.
This is the magic that the 'financial layer' should have. Lorenzo not only allows Bitcoin to earn interest; it transforms Bitcoin into a **'consumable asset'**.
For large holders and institutions, this is crucial. Tax planning is a must for the wealthy. Selling coins is a taxable event, but borrowing is not. By converting Bitcoin into stBTC through Lorenzo and then using it as collateral for loans, one can maintain control over core assets while obtaining tax-free liquidity, all while using underlying returns to hedge borrowing costs.
I am optimistic about Lorenzo because it is upgrading Bitcoin from 'digital gold' (which can only be viewed and not used) to 'digital crude oil' (an industrial-grade financial raw material). As stBTC is accepted as core collateral by more and more lending and stablecoin protocols, the market value of Bitcoin will no longer just be a static number; it will unleash hundreds of billions of dollars in credit expansion capacity.
In this world, having assets is the first step, and having a credit limit based on those assets is the second step. What Lorenzo is doing now is turning the Bitcoin in your hands into a 'black gold credit card' that never goes overdrawn and can even automatically repay itself.
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