Can the DeFi protocol Lombard break through the narrative dilemma of the Bitcoin ecosystem?

Author: Haotian; Source: X, @tmel0211

Due to the launch of the Buidlpad public sale, there has been a lot of discussion in the market about Lombard recently. One perspective claims that Lombard $BARD is to Bitcoin what stablecoin giants like Circle and Tether are to the US dollar, which is quite an apt categorization. How should we understand this positioning?

In simple terms, the goal of Lombard is to become the infrastructure layer for Bitcoin liquidity amidst the established trend of large-scale asset tokenization globally, essentially aiming to secure the narrative power for the next cycle.

1. $LBTC is familiar to many, as it is the only BTC protocol accepted by AAVE. It took 92 days to reach a TVL of 1 billion USD and introduced over 2 billion USD in liquidity across more than 12 public chains, accounting for 57% of the entire Bitcoin LST market share.

This data actually verifies one point: Lombard is activating a large amount of dormant BTC assets through LBTC. Returning to the tone set at the beginning of the article, LBTC’s ambition is not merely to be a Bitcoin LST staking token; rather, its goal is to capture a $2.2 trillion BTC market, replicating the monopoly positions of stablecoin giants Circle and Tether through an evolution path of “products > platforms > infrastructure”.

Reflecting on the successful transformation paths of Tether and Circle, they first captured the market with USDC/USDT, then became the actual issuers and distributors of “on-chain dollars,” and finally integrated into the entire web3 ecosystem’s DeFi protocols, CEX, and DApp applications across all payment scenarios.

Similarly, it is evident that Lombard’s ambition for LBTC is also to be the “total gate” of BTC liquidity.

2) In terms of infrastructure layer, Lombard has built a full-stack solution of “consortium blockchain + SDK + DeFi market”. At this point, with both a consortium blockchain and a DeFi protocol market, one can vaguely sense Lombard’s “pragmatic” approach under the current cycle of pursuing funding efficiency in an anti-fundamentalist manner.

Taking the Lombard Ledger consortium blockchain as an example, it is jointly validated by 14 top institutions including OKX, Galaxy, DCG, Wintermute, Antpool, F2pool, etc. Essentially, it does not pursue absolute decentralization in terms of technology, but achieves commercial checks and balances through the competitive and cooperative relationships among institutions.

This makes sense; exchanges themselves are competitors, and market makers need to arbitrage across different platforms. Mining pools represent the BTC infrastructure pivot, and any party that acts maliciously will harm its own core business.

Therefore, Lombard Ledger acts as a “quasi-L2” layer for BTC, which is different from the traditional Layer 2 that seeks to inherit the security of the BTC mainnet. It focuses on how to support the full-chain liquidity of Bitcoin from the perspective of capital efficiency. Additionally, the Lombard SDK allows any chain, protocol, or wallet to directly embed native BTC deposit and yield features, essentially “empowering” each chain with the capabilities of Bitcoin Layer 2.

I feel that Lombard has found a balance between decentralization and institutional needs through the use of consortium blockchain ledgers. In the current crypto narrative dominated by Wall Street institutions, there is no need to hide it; it is actually about doing institutional business with institutional thinking.

3) Finally, we must talk about the inherent shortcomings of the native narrative of the Bitcoin ecosystem. For example, Babylon has a grand and attractive narrative, using cryptographic magic technology to enable native staking for BTC; Solv Protocol has taken the route of aggregating liquidity, wrapping various BTC into SolvBTC to address the issue of fragmented liquidity.

Including Lombard’s set of commercial and pragmatic strategies, if we only focus on the native crypto market, it always feels a bit powerless. After all, if we assume the prosperity of a BTC ecosystem as the basis for pricing and valuation, everyone will fall into a passive situation.

The essence of the problem is: BTCFi is still in the “playing by itself” stage, lacking real external funding injection.

Therefore, this series of actions by Lombard seems to break out of the pure Crypto native narrative, such as its exit from tokenized options, staking ETFs, and other institutional products. The goal of these products is clear — to allow traditional financial institutions to participate in BTCFi, and they may not even need to understand what DeFi or LST is; perhaps they only need to know that this ETF can provide an 8-10% BTC-denominated return.

To some extent, first allow institutional funds to compliantly allocate crypto assets, and then gradually guide them to participate in on-chain activities, until the provided products and services can directly connect to traditional financial funding pools.

Let external funds move by themselves, so you don’t have to wait eagerly for the uncertainty of that native BTC “ecological prosperity” future.