RedStone co-founder Marcin Kaźmierczak stated that without a Bitcoin staking oracle, liquidity staking tokens based on BTC could only be used to provide liquidity for decentralized exchanges (DEXs).

RedStone Oracles, a significant smart contract oracle data provider, has launched a staking oracle specifically designed for Bitcoin staking.

With the new implementation, users can stake their Bitcoin in exchange for liquidity staking tokens (LST) based on Bitcoin on the Ethereum blockchain, such as Lombard Staked BTC (LBTC).

RedStone co-founder and Chief Operating Officer Marcin Kaźmierczak told Cointelegraph on October 8 that this marks the first time BTC LSTs are available for lending and other uses in decentralized finance (DeFi).

What are staking oracles and why are they needed?

Blockchain oracles are services that act as a bridge between real-world data and events and the blockchain. Their purpose is to validate real-world off-chain data on the blockchain.

Oracles are widely used in many DeFi protocols, including lending (allowing users to borrow using their cryptocurrency holdings) and staking (enabling them to earn rewards by locking cryptocurrency assets in smart contracts).

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Blockchains cannot connect to real-world data and events on their own. Source: Chainlink

Staking is an emerging and increasingly popular crypto-economic model that spans the smart contract ecosystem and is directly related to oracle networks.Pledge oracles collect and verify key inputs, such as pledge rewards, slashing events, and other data required for the normal operation of LSTs (such as Lido Staked Ether (stETH)).

Without an oracle, Bitcoin LST can only be used to provide liquidity for DEXs

Kaźmierczak told Cointelegraph that with RedStone's new Bitcoin staking oracle, users can use Bitcoin LST (including LBTC) in a similar way to using wstETH with Lido.

For example, users can achieve LBTC in DeFi lending on platforms such as Morpho and Compound. They can also use the oracle and LBTC on the Gearbox protocol to generate composable leverage.

RedStone's Chief of Staff Tomasz Płatek (left) is next to Co-founder and Chief Operating Officer Marcin Kaźmierczak. Source: LinkedIn

Kaźmierczak said: "As a Bitcoin holder, you can pledge your Bitcoin through Babylon, and you can also receive LST tokens LBTC on the Ethereum mainnet through Lombard." He added: "Without an oracle, LBTC can only be used to provide liquidity for decentralized exchanges, as this does not require an oracle."

He said that the introduction of a Bitcoin staking oracle may trigger "immediate changes" in the DeFi ecosystem surrounding Bitcoin LST, similar to the ecosystem created around Ethereum LST.

"Due to the nature of Bitcoin, which can grow with market excitement, even a small portion of the huge base value of profits is a big deal," Kaźmierczak said.

A few months ago, RedStone Oracles raised $15 million in Series A financing led by major cryptocurrency investment company Arrington Capital.