A war for on-chain market dominance may be brewing. The question: What will be the collateral of choice in the decentralized finance (DeFi) economy? A

Could Bitcoin Become DeFi’s Collateral of Choice? Lombard Finance Says So

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2025-01-02 20:30:04

A war for on-chain market dominance may be brewing. The question: What will be the collateral of choice in the decentralized finance (DeFi) economy?

As of press time, DeFi protocols across all ecosystems have locked in almost $126 billion in value, according to DeFiLlama data, inching closer every day to their 2021 high of $175 billion. The majority of those pledged funds take the form of ether (ETH) and derivatives like yield-producing staked ether liquid tokens (stETH) and wrapped eETH (weETH), with wrapped bitcoin (wBTC) and stablecoins as a whole competing for fourth and fifth place.

But the team behind Bitcoin-based DeFi protocol Lombard Finance intends to shake things up with LBTC, a new liquid bitcoin token. The idea, according to Lombard co-founder Jacob Philips, is to dethrone ETH and stETH and install bitcoin as the collateral of choice in the entire on-chain economy.

“On centralized venues, bitcoin is the prime collateral. There's no question about this. Why is it not the case in DeFi?” Philips told CoinDesk in an interview. “Bitcoin only does one thing well, and it's being a rock-solid store of value. It is the perfect collateral. There's no reason that we shouldn't be building DeFi on top of bitcoin.”