BounceBit, a Bitcoin re-pledging project, has announced that its Liquid Custody protocol will be launched along with the mainnet. What are the benefits of this product for its ecosystem? How does it differ from existing Liquid Staking?
Background: Introduction to BounceBit
BounceBit aims to address the lack of liquidity and transparency in assets deposited in CeFi (Centralized Finance) institutions.
Introduction to BounceBit Liquid Custody
Liquid Custody is a variant of liquidity staking.
Implementation of BounceBit Liquid Custody Protocol
BounceBit has implemented the Liquid Custody protocol.
Opportunities and Challenges of BounceBit Liquid Custody Protocol
Opportunities:
– Building an organic staking reward system for Bitcoin by creating the BounceBit Chain.
– Generating native income for Bitcoin through network returns.
Risks:
– BounceBit is a re-pledging project built on the Bitcoin ecosystem.
– Bitcoin faces unique challenges in existing DeFi structures, limiting sustainable and significant returns.
BounceBit’s Solution: Liquid Custody
BounceBit proposes a new product, Liquid Custody, which combines the advantages of CeFi and DeFi. It aims to provide liquidity to CeFi assets and reduce the barriers to using the service.
Liquid Custody is similar to liquid staking as it increases asset liquidity by creating derivative tokens tied to the value of the underlying assets. However, instead of collateralizing assets on the Ethereum network, Liquid Custody entrusts the assets to custodial institutions and issues a proof token called Liquid Custody Tokens (LCT).
Liquid Custody combines the advantages of CeFi and DeFi by ensuring secure asset custody through smart contracts and maintaining accessibility and circulation of the assets.
BounceBit currently accepts assets such as BTC, USD, and ETH. When users deposit assets into the BounceBit Liquid Custody protocol, they receive LCT as proof, and corresponding tokens like BBTC, BBUSD, and BBETH are generated for the users.
Liquid Custody will support various blockchains, including Ethereum and BNB Chain, and will be launched along with the mainnet.
Liquid Custody is a fundamental component of the BounceBit ecosystem and aims to solve the transparency and security issues of CeFi assets while providing liquidity.
However, it is important to consider factors such as the long-term operation of partnering institutions and potential risks associated with the layered structure of the BounceBit Liquid Custody protocol.
In conclusion, BounceBit’s Liquid Custody protocol has the potential to attract attention, especially in the Bitcoin ecosystem’s pursuit of maximizing asset efficiency. However, the long-term development of the product should be assessed carefully.
BBTC: BounceBit Token
BBUSD: BounceBit USD
LCD: Liquid Custody
Liquid Custody Tokens: LCT