Problem: 'Bitcoin Solo Staking?'

“the absence of arbitrage opportunities is the basis of almost all modern financial theory” (Lamont & Thaler, 2003, p. 192)

Solo staking has always been a core priority for Ethereum, allowing anyone to run their own node and actively contribute to decentralization.

Bitcoin [Trigger Alert] does not have a built-in staking mechanism, yet numerous projects have attempted to integrate it into various Proof of Stake frameworks. However, these efforts remain fragmented within emerging ecosystems, forcing participants to relocate their liquidity — in form of an LST— to platforms where it can be effectively utilized.

Bitcoin (as well as ETH) LSTs are walled gardens

Bitcoin LSTs today can only be acquired by staking with a trusted issuer or operator. This centralized approach limits both retail and institutional adoption, as Bitcoin is held across various jurisdictions with local regulations and institutional mandates restricting its flow onto Ethereum.

However, we are seeing shifts in the space—Lido, for instance, is now introducing support for solo stakers through BYOV (Bring Your Own Vault) vaults, first proposed in the GOOSE initiative. Additionally, a recent Ethresear.ch proposal, SOLO, has sparked discussions around minting an LST for solo stakers. This signals a growing recognition of the need for decentralized and flexible staking solutions.

Nearly $120 billion in Bitcoin is locked with a few custodians, awaiting solo staking

From Fidelity's S-1 filing for spot ETH staking to Bitwise's acquisition of Attestant, and BlackRock's growing interest in European staking ETPs, it's clear that institutions are embracing solo staking to compete for liquidity. However, similar opportunities do not exist for Bitcoin, as staking typically requires trusting an operator with custody of liquidity. In cases where there is no trust assumption, access to funds is lost for a specified timelock, rendering them temporarily unusable.

Delayed withdrawal affecting arbitrage efficiency

We’ve already seen how restricted withdrawals impact arbitrage efficiency in stETH/ETH markets:

• During periods of high sell pressure, withdrawal delays caused discounts in stETH prices relative to ETH.

• This delayed arbitrage mechanism meant that even though stETH was ultimately redeemable 1:1, the inability to exit immediately created pricing inefficiencies.

• Market makers could only capture the spread over time, introducing liquidity and execution risks.

In the Bitcoin space, the well-known GBTC trade suffered from the lack of an ETF structure, resulting in inefficient market arbitrage and price instability.