Lombard is changing how its liquid staked Bitcoin token, LBTC, generates yield, moving away from Babylon's Bitcoin staking protocol toward a covered-call options strategy managed by asset manager Bitwise. The new approach targets a 2.5% net annual percentage yield denominated in Bitcoin and will apply to up to 60% of LBTC's backing assets, with the underlying Bitcoin held in custody rather than delegated to network validators.
Under the outgoing model, LBTC holders' Bitcoin was delegated to Lombard's finality providers on Babylon, which secure a set of proof-of-stake networks known as Bitcoin Secured Networks and pay for that security in their own native tokens. Those rewards were converted to Bitcoin and passed through to LBTC holders. The Bitwise-managed replacement instead generates income by writing options — selling other market participants the right to buy or sell Bitcoin at a set price — a strategy more common in traditional derivatives markets than in Bitcoin-native staking.
A different risk profile, not just a different yield source
Related: Fresh Wallet Opens $6.22M 40x Bitcoin Long on Hyperliquid
The switch changes what backs LBTC's returns in a meaningful way. Babylon-sourced yield depended on demand for Bitcoin-backed security from other networks and carried exposure to the value of the tokens those networks paid out. A covered-call strategy instead trades away some potential upside if Bitcoin's price rallies sharply — since written calls cap gains above the strike price — in exchange for steadier premium income regardless of which direction smaller networks' native tokens move.
For LBTC holders, the practical effect is a token whose yield now behaves more like a traditional options-income product than a staking reward, managed by a registered asset manager rather than routed through validator infrastructure. Whether the 2.5% net APY target proves more reliable than Babylon-based yield will depend largely on Bitcoin's volatility and Bitwise's execution of the options strategy over time.
