From the perspective of pre-launch hype, the success of Babylon LST is not easy.

Written by Rui

First of all, let's talk about the conclusion. It's difficult for Babylon's LST to be ALPHA. It's also difficult to replicate the frenzy of Eigen LST in speculation.

First, let's talk about why Eigen LST is successful. In my opinion, there are several reasons:

1. Eigen itself gradually attracts TVL in the rising market cycle, without rushing to issue coins, providing a soil for the speculation of LST. Eigen's mining rewards include ETH basic stake rewards, LST coins, Eigen's own coins, and various expectations from AVS. The 3-5% of ETH stake is natural and supporting LST can significantly alleviate the given Yield rewards.

2. There is a strong DeFi infrastructure on ETH, AAVE makes it possible for revolving loans, and Pendle's Derivatives launch satisfies those who hope to hedge and double their bets.

Although there are ETH derivatives with cap after February 10th, Native Staking provides a window, in my opinion, as a means to support LRT flip LST. Correspondingly, because this money is real ETH, it allows exchanges to identify these large investors.

4. Eigen successfully upgraded its narrative from EigenDA to AVS, which replaces the existing ETH infrastructure, becoming an indispensable part of ETH's security.

Let's talk about why it is considered difficult to replicate the glory of Eigen for Babylon.

1. There is not much time and space left for Babylon to absorb TVL, and it is not necessary for Babylon to pay for a TVL of 5B+ for more than half a year. The BTC ecosystem also does not have a basic Intrerest Rate to leverage.

2. BTC ecosystem lacks Defi infrastructure, which means everything needs to be done by LRT itself, increasing the risk. Similarly, without Defi infrastructure, it is difficult to achieve a high scale of pricing.

3. There is no need for Babylon to store all the money, just independent users (if you want to support LST, just wrap it up for the partner), which is also the reason why each account only has 0.02BTC. Since the market position in the BTC ecosystem has been determined, there is no need to pay too much for TVL (the TVL of Merlin 4B has not had a good effect and has covered the vast majority of Large Investors). Moreover, there are too many self-hosted TVLs in the BTC ecosystem, and blindly accepting them is risky.

4. From the perspective of the first phase, LST has borne a large amount of gas, which is used for the purpose of absorbing and demonstrating its strength to exchanges if Babylon is widely opened. But what if each subsequent phase is only 0.02BTC per account?

I am not pessimistic about Babylon itself, because over time I think they will bring something different to the BTC ecosystem, but from the perspective of pre-launch hype, the success of Babylon LST is not easy.