Why is it difficult for Babylon's LST to replicate the success of Eigen's LST?

Author: Rui, HashKey Capital Source: X, @YeruiZhang

Let me start with the conclusion, Babylon’s LST is very The difficulty is Alpha, and it is difficult to replicate the grandeur of Eigen LST in terms of hype.

Let me first talk about why Eigen LST is successful. In my opinion, there are several reasons:

1. Eigen itself gradually attracts TVL during the rising market cycle, and does not rush to issue coins, which gives LST the soil for speculation. Eigen’s mining rewards are ETH basic staking rewards + LST coins + Eigen’s own coins, and various AVS are expected. The 3-5% of ETH pledged is natural, and supporting LST can significantly alleviate the yield rewards given.

2. There is a strong Defi infrastructure on ETH, AAVE makes revolving loans possible, and Pendle’s online derivatives allow people who want to hedge and double their bets All got what they wanted.

3. Although there are ETH derivatives and Caps after February 10th, Native Staking provides a window, which in my opinion supports LRT flip LST a means. Correspondingly, because these funds are real ETH, the exchange can locate these large investors.

4. Eigen has successfully upgraded itself from the narrative of EigenDA to protect security to the vision of AVS replacing the existing ETH infrastructure, becoming indispensable to ETH part.

Let’s talk about why it is difficult for Babylon to replicate Eigen’s success.

1. There is not much time and space left for Babylon to absorb TVL. Babylon does not need to pay for 5B+ TVL for more than half a year. There is no basic interest rate in the BTC ecosystem to take advantage of.

2. The BTC ecosystem has no Defi infrastructure at all, which means LRT needs to do everything by itself, which makes risks more likely. It is also difficult to achieve high scale pricing without Defi infrastructure.

3. Babylon does not need to deposit all the money, it just needs independent users (if you want to support LST, just outsource it to the partner) , which is why each account only has 0.02 BTC. Now that the market position in the BTC ecosystem has been determined, the price paid for TVL does not need to be too high (the previous TVL with Merlin 4B did not have a good effect and covered the vast majority of large investors). Moreover, there are too many self-hosted TVLs in the BTC ecosystem, and it is risky to blindly accept them.

4. Judging from the first period, LST itself bears a large amount of GAS. This part is for the accumulation and trading if Babylon is launched on a large scale. Showing muscle, but what if each subsequent period has a number of 0.02 BTC?

I am not negative about Babylon itself, because as time goes by, I think they will bring something different to the BTC ecosystem, but the hype before its launch From a perspective, the success of Babylon LST is not easy.