Binance Labs and Tim Draper-backed Zest Protocol have launched the new BTCz token, marking the latest development in Bitcoin-specific decentralized finance (DeFi).

The new BTCz token will allow Bitcoin holders to earn staking income on their Bitcoin through the Babylon Protocol.

According to Zest Protocol co-founder Tycho Onnasch, the new Zest Protocol Bitcoin (BTCz) token could provide a significant increase in the capital efficiency of the world’s first cryptocurrency. Onnasch said:

“[BTCz] will generate a passive return from validating PoS networks and maintain liquidity by keeping BTCz as a liquid token. “There are currently more than 10 BTC derivatives that do something similar – but BTCz is the only token that leverages the unique features of Stacks to offer its holders much greater security.”

Zest is among the protocols of which Bitcoin was the first cryptocurrency and is creating more use cases around a new paradigm known as Bitcoin DeFi (BTCFi). Zest Protocol’s new token will be a yield-generating cousin to Stacks’ sBTC token, according to Onnasch, adding:

“A yield-generating BTC asset like BTCz, when paired with sBTC, will be critical to the safe adoption of Bitcoin DeFi. This is something built by the engineers behind Stacks’ sBTC. “This is just the beginning of the rollout of our BTC yield products at Zest Protocol Earn.”

Although BTCz is a promising development for Bitcoin holders, its opportunities to generate returns remain unclear.

This is due to the fact that Babylon Protocol’s return percentage has not yet been determined, and this will constitute the underlying return of BTCz. Onnasch told Cointelegraph:

“The staking return will be the Babylon staking return. Currently, BTC on Babylon does not yet generate returns, but this will be available in the coming months as Babylon launches verification of their PoS network.”

Following the 2024 Bitcoin halving, new protocols have emerged that offer tokens tradable on Bitcoin, such as Runes, while more and more protocols are developing Bitcoin DeFi solutions.

In early May, Hermetica launched USDh, the first Bitcoin-backed synthetic US dollar to generate returns. USDh was launched with an initial return of up to 25% for users.

In early August, Coinbase, the world’s second largest crypto exchange, announced that it was developing a new Wrapped Bitcoin (BTC), Coinbase BTC (cbBTC), which created widespread excitement among crypto investors. It is stated that the new token can significantly increase the adoption of Bitcoin-specific DeFi. T.

Rena Shah, COO of rust Machines, said: “The opportunity for cbBTC presents a huge onboarding opportunity for Bitcoin DeFi, based solely on existing Coinbase users…” In July, Arthur Hayes’ Maelstrom fund announced a Bitcoin grant program of up to $250,000 per developer to advance technical development of the Bitcoin network.