Babylon introduces a novel approach to enhancing Proof-of-Stake (PoS) blockchains by leveraging the security Bitcoin offers. This innovative solution allows Bitcoin holders to earn rewards from their idle assets without the need to transfer them to a different blockchain. By locking their Bitcoins, users gain the ability to validate PoS chains and earn yield. Babylon offers quick unbonding and native Bitcoin staking, ensuring that Bitcoin stakers enjoy optimal liquidity and returns. Importantly, it is self-custodial.
Babylon Series A funding round attracted notable investors such as Paradigm, Hack VC and Polychain Capital, with additional support from Polygon Ventures, Framework Ventures and OKX Ventures. These investments are being used to develop a Bitcoin staking protocol that bridges the gap between the DeFi ecosystem and the Bitcoin blockchain.
Innovating the Financial Utility of Bitcoin
Bitcoin stands as a cornerstone of blockchain technology, renowned for its robust security provided by its Proof-of-Work (PoW) system. As the pioneering digital currency, Bitcoin emerged in 2009 setting the stage for the future of decentralized financial systems. With the largest market capitalization and unparalleled secure track record Bitcoin remains the number one asset in crypto. In today’s blockchain space, Web3, this offers opportunities and Babylon innovates the financial utility of Bitcoin.
Staking Idle Bitcoin
Approximately 70% of Bitcoin supply has been inactive for the past year, highlighting a significant opportunity. While PoS chains frequently generate yield through active participation, Bitcoin inactivity presents a challenge for integration into these systems. Existing solutions often involve bridging or custody which come with certain risks.
In PoS systems, validators commit their cryptocurrency holdings to secure the network, whereas the Bitcoin PoW mechanism secures the network through computational efforts. This distinction allows Bitcoin to be used more flexibly, freeing up its assets for other purposes while PoS chains rely on financial stakes for security.
The DeFi space, predominantly driven by PoS systems, could benefit from Bitcoin's security features. Babylon combines Bitcoin’s PoW security with the energy-efficient PoS consensus mechanism, offering a unique solution that leverages Bitcoin’s strength to address vulnerabilities in PoS networks. This integration enhances the security and functionality of PoS chains, whether for new developments or existing systems.
Origin of Babylon
Developed under the guidance of Professor David Tse and supported by a team of blockchain experts including Xinshu Dong and Stanford Tse Lab — Babylon addresses critical cross-chain blockchain challenges. The research paper co-authored by Tse highlighted PoS vulnerabilities and inspired the Babylon protocol to improve PoS security using Bitcoin.
Babylon Bitcoin Staking Protocol - EOTS
Babylon utilizes Extractable One-Time Signature (EOTS) technology, allowing Bitcoin holders to participate in PoS security while keeping their assets secure. EOTS is derived from the Schnorr signature algorithm, enabling Bitcoin staking on the Bitcoin network without third-party interference. Babylon advanced time-stamping protocol ensures synchronization between Bitcoin and PoS chains, facilitating rapid unbonding.
Babylon’s modular design supports scalable staking across various PoS chains. Bitcoin holders can choose which PoS chains to support and earn rewards accordingly. The protocol allows developers to configure stake amounts and rewards, optimizing the crypto economy.
Babylon structure includes a 3-Layer Architecture
- Bitcoin Layer: Utilizes Bitcoin security for transaction protection.
- Babylon PoS Chain: Connects Bitcoin with PoS chains, running smart contracts and handling transactions.
- PoS Layers: Comprises various PoS chains, chosen for their unique strengths to provide scalability and flexibility.
Unlimited PoS Chain Validation
Babylon protocol allows validators to participate in an extensive range of PoS chains, earning commissions through validation. Bitcoin must be lockable, delegatable, slashable and have an unbonding period to qualify as a staking asset.
Safe Delegation and Slashing
Babylon ensures secure delegation by using EOTS public keys under slashing conditions. Users can prevent collusion between validators and covenant committees by incorporating their public key into slashing conditions. The protocol uses three sets of signatures to safeguard against theft and ensures that misbehavior results in slashing.
Atomic and Partial Slashing
Babylon’s protocol supports atomic slashing, where malicious validators risk exposure of their EOTS secret key, affecting all their delegated stakes. Partial slashing, supported by many PoS systems, mitigates the impact of slashing by only penalizing a portion of the stake, with delayed refunds to prevent abuse.
Restaking Capabilities
Babylon enables Bitcoin multi-staking, allowing users or delegated finality providers to participate in multiple PoS systems simultaneously. This flexibility ensures that Babylon’s protocol can transform Bitcoin into a versatile staking asset with lockable, slashable, delegatable, and restakable properties.
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