Master Protocol Exclusive Review: Activating BTC Yield Potential
BTC is the most widely accepted and largest asset in the crypto industry, reaching its peak in the decentralized value storage sector. But does such an asset have any flaws in the current context?
Yes! Most of its liquidity is locked on-chain, unable to generate yield for holders. Here’s a simple example:
Tom and Mike both entered the crypto space at the same time. Following the advice of a mentor, Tom heavily invested in Bitcoin and moved it to a cold wallet without further action. Mike, on the other hand, bought Ethereum and interacted with various DeFi protocols on-chain.
Over time, Tom learned that Mike had staked his ETH in LST protocols, deposited it into EigenLayer for restaking, bought Pendle’s PT to secure over 20% annual returns, and deposited into Blast to accumulate points and eventually receive airdrop tokens. Despite varying returns from different financial activities and ETH’s fluctuating price, Li’s ETH holdings kept increasing daily.
However, Tom’s BTC remained stagnant. Since Bitcoin doesn’t support smart contracts, he couldn’t find a native and convenient way to put his BTC to use.
Tom felt anxious, thinking, “In a world full of opportunities, letting assets sit idle without generating yield is practically a crime.” It’s like owning property that, while not losing value, misses out on rental income. So, how can Tom make his BTC generate yield?
BTC Yield: A Misalignment Between Potential and Infrastructure
Compared to ETH yield, the BTC yield sector is still a blue ocean.
Bitcoin’s Proof of Work (PoW) mechanism restricts holders from earning yield through direct staking. Despite Bitcoin’s dominance in market capitalization, a large amount of BTC remains underutilized. Especially when compared to Ethereum—although Ethereum’s market cap is about one-third of Bitcoin’s (ETH at $400 billion)—its total value locked (TVL) in DeFi is tens of times higher than BTC’s.
According to the data above, if just 5% of BTC enters the yield sector, its TVL could surpass Ethereum’s mainnet. If the ratio of TVL to market cap matches Ethereum’s, it could create a market with over $150 billion in TVL! This highlights the immense potential of the sector. However, the current BTC yield infrastructure is immature, leading to a mismatch between potential and infrastructure. How can we reverse this, attract users, and expand the market?
The development of Bitcoin’s Layer 2 (L2) solutions provides new opportunities for BTC yield, but these solutions are not yet user-friendly for retail investors. Master Protocol aims to address this issue through product innovation, becoming the user entry point for this sector.
What Can Master Protocol Bring to Bitcoin?
Current State of Bitcoin Yield
As mentioned earlier, a significant amount of Bitcoin liquidity is locked on-chain, and its yield potential remains untapped. To address this inefficiency and unlock vast BTC liquidity, various Bitcoin Layer 2 (L2) solutions have been developed, using different technical approaches to facilitate BTC staking and yield generation.
Notable L2 solutions like Babylon, Botanix’s Spiderchain, Bitlayer, BounceBit, B², and Merlin have created various methods to support BTC staking. Except for Babylon’s remote staking, most L2 solutions use bridging or mirroring techniques to transfer native Bitcoin to Proof of Stake (PoS) chains.
Through Master Protocol, pStake, Bedrock, Pell, and Lorenzo, users can stake Bitcoin on various L2s and receive Liquid Stake Tokens (LST) as proof of their staking. This allows users to reinvest their LST in multiple scenarios, ensuring yield without compromising liquidity. Furthermore, by adopting restaking protocols, users can further stake LST to obtain Liquid Restake Tokens (LRT), enhancing their investment capacity and asset liquidity.
Staking and restaking provide users with network and protocol rewards, making LST and LRT yield-generating assets. These can be categorized as single-layer and dual-layer yield tokens. Looking ahead, with the development of Babylon’s new Active Validating Service (AVS), broader recognition of application chains’ value, and the growth of DApps and memes on other L2s, more new yield tokens will be created in the Bitcoin ecosystem.
Master Product Positioning
The Bitcoin ecosystem already has several L2 solutions and liquid staking protocols (LST protocols) like Botanix Spiderchain. These protocols aim to enhance Bitcoin’s scalability and liquidity, but their complexity (e.g., frequent network switching, multiple asset bridges) makes it difficult for average users to participate.
Master Protocol seeks to simplify this process and enhance user engagement through its product portfolio, particularly the Master Yield Market and its LST protocol on Botanix Spiderchain.
Master Protocol’s two main products:
- Master Yield Market: Provides yield trading opportunities, aggregates Bitcoin ecosystem assets, packages them into MSY, and splits them into MPT (principal) and MYT (yield) for user trading.
- LST Protocol on Botanix Spiderchain: Enhances Bitcoin’s liquidity and yield through liquid staking protocols.
Thus, Master Protocol can create synergy among various protocols in the Bitcoin ecosystem, benefiting overall ecosystem development. By packaging and aggregating yield assets from different Bitcoin ecosystem protocols, Master Protocol can serve as a one-stop Bitcoin ecosystem yield trading hub.
Users can access yield opportunities from different protocols through this “entry point,” eliminating the hassle of repeatedly comparing and switching between numerous protocols. As a user entry point, Master Protocol not only gains adoption but also provides traffic to various Bitcoin ecosystem protocols it collaborates with.
All of this is based on Master Protocol’s core product, the Master Yield Market.
Master Yield Market
The basic function of the Master Yield Market is to aggregate Bitcoin ecosystem assets, package them into MSY, and split them into MPT and MYT for users to trade. Its principle is similar to the Pendle protocol:
- MPT (Master Principal Token): Represents the principal. Purchasing MPT allows one to lock in the profits of the underlying asset in advance, akin to a fixed income product.
- MYT (Master Yield Token): Represents interest. MYT has a low unit price but can increase capital utilization, akin to leveraging expected returns.
Master Yield Market can be simply understood as Pendle on BTC. This is high praise and symbolizes infinite potential—Pendle is the only DeFi protocol that broke through this year, with both its platform and token price developing very well, driving the development of on-chain interest rate derivatives.
In TradeFi, interest rate derivatives occupy the majority of the derivatives market. As of June 2023, the overall derivatives market position reached $714.7 trillion, with interest rate derivatives’ open positions amounting to $573.7 trillion, accounting for 80.2% of the total.
This is precisely the track where institutions are most likely to enter. Since the BTC ETF has been officially approved by the SEC, perhaps a BTC interest rate trading platform will be adopted by institutions before one on Ethereum, bringing even greater potential.
Currently, Master Yield Market has collaborated with multiple partners such as Botanix, BounceBit, and Bitlayer. Supported assets include native assets like stBB and stBBTC from BounceBit. Upcoming assets include Pell protocol assets from BounceBit and Bitlayer, Bedrock (uniBTC) and pSTAKE (yBTC) assets on Babylon, Lorenzo protocol assets on multiple BTC Layer 2s, and Master Protocol assets (mpBTC) on Botanix Spiderchain.
Master Yield Market will integrate these diversified assets, providing them in the form of MPT and MYT for user trading. These strategic integrations will offer better accessibility to the Bitcoin ecosystem, significantly enhancing Bitcoin’s liquidity and capital utilization, driving the ecosystem towards prosperity.
In the future, Master Yield Market will also support USDT and other BTC assets (ETH, BSC, etc.), such as directly using wBTC to purchase MPT and MYT of corresponding ecosystem projects’ underlying assets. Master Protocol helps these projects with asset routing to achieve necessary cross-chain transactions, offering users a seamless interaction experience.
This allows retail investors in the Bitcoin ecosystem to easily engage in yield trading, which is the core advantage of Master Protocol. However, any protocol depends on user adoption, and to achieve this, Master Protocol uses the Master Yield Pass to incentivize users.
Master Yield Pass
The Master Yield Pass is an incentive measure launched by Master Protocol, with a total of 10,000 issued on Base for free minting on June 24. All NFTs have been minted and can be purchased on secondary NFT markets like Opensea. Currently, its price on the secondary market is only 0.001 ETH, about $3, making it very low-cost. If you are optimistic about the BTC yield track, you might consider buying it for future airdrops/trading profits.
Staking the Master Yield Pass grants rights including:
- Points from Trading Pool and Referral Pool, which can be exchanged for token airdrops in the future.
- Platform fee dividends. Assuming a total trading volume of $200 million and platform fees reaching the million-dollar level, each NFT can earn over $100 in dividends. (For comparison, Ethereum’s yield trading platform Pendle has accumulated trading volumes of several billion dollars.)
- Future benefits: whitelist eligibility for NFTs/events/IDOs, etc.
The main activities are trading mining (Trading Pool) and referral mining (Referral Pool), but note that they use independent point calculation systems, and their point bonuses do not share.
Trading Mining – Trading Pool
Earn points based on trading volume. Staking Yield Pass provides a 3x bonus.
Point Calculation Rules:
- Personal total points = Personal total trading volume × Point bonus factor.
- Airdrop quantity = (Personal total points during the event / Total points across the network during the event) × Total airdrop amount.
1. Staked Pass Holders:
- Holders staking Yield Pass can receive a 3x point bonus.
- If a user’s total trading volume is 1,000 USDT, they can earn: 1,000 (total trading volume) × 3 (Yield Pass bonus) = 3,000 points.
2. Non-staked Pass Holders and Non-pass Holders:
- Can only earn basic trading points.
- If a user’s total trading volume is 1,000 USDT, they can earn: 1,000 (total trading volume) × 1 (no bonus) = 1,000 points.
Referral Mining – Referral Pool
Earn points based on the number of invitees. Staking Yield Pass provides a bonus.
1. Point Calculation Rules:
- Stake Pass Holder: Can automatically mine 200 points daily, which is then multiplied by the buff bonus to calculate actual points earned. Calculation formula: Points = 200 (daily base points) * [100% (base factor) + 2% (each Holder Buff bonus) * Number of Holders + 1% (each non-Holder Buff bonus) * Number of non-Holders + 50% * Inviter’s bonus].
- If A stakes an NFT, invites 50 staked Holders and 100 non-Holders who meet the $100 trading volume validation, and joins B’s team with B’s bonus being 50%, then A can earn daily points as follows: 200 × (100% + 50 × 2% + 100 × 1% + 50% × 50%) = 650 points.
- Non-staked Pass Holders and Non-pass Holders: No automatic mining points, no Buff bonus.
2. As an Inviter:
- Only staked Pass Holders can be inviters.
- If the invitee is a staked Pass Holder: Each invitee provides a 2% Buff bonus, and both parties receive a random point red packet.
- If the invitee is a non-staked Pass Holder or a non-Pass Holder: Each invitee provides a 1% Buff bonus (invitee needs to complete at least $100 in trading volume for effective user verification, after which both parties receive a random point red packet).
3. As an Invitee:
- If the invitee is a staked Pass Holder, after joining the team, they enjoy 50% of the inviter’s Buff bonus (if the inviter’s current Buff bonus is 50%, the invitee receives a 25% Buff bonus).
- If the invitee is a non-staked Pass Holder or a non-Pass Holder, they cannot receive any bonus. If the user completes effective user verification (trading volume reaches $100), they receive a participation award (random red packet, 10-200 points).
Genesis Master Pass
In addition to Master Yield Pass, Master Protocol’s first NFT series, Genesis Master Pass, is also ongoing, allowing participants to earn airdrop points through staking tasks. This series can currently be purchased on secondary markets like Opensea. Interested readers can learn more and participate through official documents and tutorials.
Participating in the BTC Ecosystem Through Master Protocol
Overall, Master Protocol’s Master Yield Market simplifies the BTC yield process, allowing retail investors to directly trade BTC LST and LRT assets using USDT, ETH, or WBTC, unlocking significant yield opportunities in a simple and efficient way.
With innovative products and multiple rights NFTs to incentivize users, it promotes trading activities and user acquisition, accelerating its adoption. The BTC yield track, with its potential and infrastructure mismatch, now has its “user entry point.” Perhaps, after truly finding the Project Market Fit, the potential released by this sleeping giant will amaze us all.
Now, Tom can use Master Protocol, this one-stop Bitcoin yield entry point, to stake his Bitcoin on Botanix Spiderchain, buy PT of BounceBit stBBTC to lock in returns, and purchase YT of Bedrock issued by Babylon, thus positioning himself for token airdrops from both Bedrock and Babylon—generating yield for his BTC in multiple ways and no longer envying Mike.
For more information about Master Protocol, visit their official website, Twitter, Discord, and Telegram.