Bybit has partnered with lending protocol Avalon to offer Bitcoin yield to its users.

According to an April 14 Avalon Labs X announcement, the centralized decentralized finance (CeDeFi) protocol will now be a part of the exchange’s

Crypto exchange Bybit has partnered with lending protocol Avalon to offer Bitcoin yield to its users.

According to an April 14 Avalon Labs X announcement, the centralized decentralized finance (CeDeFi) protocol will now be a part of the exchange’s yield product, Bybit Earn. Avalon said it will allow the platform’s users to earn yield from Bitcoin (BTC) by arbitrating on its fixed-rate institutional borrowing layer.

Source: Avalon Labs

Avalon Labs announced in March that it raised a minimum of $2 billion worth of credit with possible scaling as the need arises. The product allows institutional borrowers to access USDt (USDT) liquidity without liquidating their Bitcoin holdings at a fixed 8% borrowing cost.

In February, Avalon Labs also announced it was considering issuing a Bitcoin-backed debt-focused public fund. Venus Li, co-founder of Avalon Labs, said at the time that the fund could be issued by leveraging a Regulation A US securities exception:

Centralized and decentralized finance unite

Avalon Labs’ product is a CeDeFi protocol, somewhere between decentralized finance (DeFi) and centralized finance (CeFi). This product category — with increased control over capital flows and access — often has advantages in meeting regulatory requirements for integrating with CeFi platforms.

The Bybit Earn integration leverages Avalon Labs’ 1:1 Bitcoin-pegged token FBTC, developed by DeFi protocol Mantle and Bitcoin-centric crypto developer Antalpha Prime. These tokens are then bridged onto Ethereum and other blockchains.

Related: Ethena Labs, Securitize launch blockchain for DeFi and tokenized assets

A multi-protocol system

Avalon Labs’ platform accepts FBTC as collateral and lends it at fixed rates. The borrowed USDt stablecoin is then deployed to high-yield strategies through the Ethena Labs synthetic dollar protocol. The assets employed in those strategies include Ethena USD (USDe) and Ethena Staked USD (sUSDE). The announcement claims:

In other words, Avalon Labs serves as a bridge between Bybit and the yield-earning potential of Etena Labs’ protocol. Avalon Labs describes this as a “CeFi to DeFi” bridge.

The news follows Etena raising $100 million in late February to deploy a new blockchain and launch a token focused on traditional finance. In January, Etena also announced plans to roll out iUSDe, a product identical to USDe but designed for regulated financial institutions.

Bybit did not respond to Cointelegraph’s inquiries by publication.