On August 22, the Bitcoin staking platform Babylon officially launched on the mainnet. In the past, we were used to hearing about Ethereum staking and Solana staking, but this is the first time that the concept of Bitcoin staking has appeared in people’s field of vision. When Babylon launched its testnet, the novel narrative confused many: What exactly is Bitcoin staking? What about its benefits and gameplay? After in-depth understanding, I found that Bitcoin staking does provide users with a new way to make full use of idle Bitcoin assets.
Project background
As a Bitcoin staking platform, Babylon is committed to extending the security of Bitcoin to all PoS blockchains without adding any additional energy costs. In May of this year, Babylon announced that it had received US$70 million in financing. The investors behind it included well-known VC teams such as Paradigm, Polychain, and Binance Labs. Although the Babylon team is slightly less experienced in Web3 projects, their strong academic background and luxurious investment lineup undoubtedly add credibility to this project.
After achieving outstanding results on the Ethereum Restaking track, many projects have poured into the Staking-related field, not only Ethereum and Solana, but similar projects have also begun to appear on Bitcoin, such as BounceBit and Babylon. This shows that the market is confident in this new type of Staking track, and the emergence of Babylon may create a new gameplay and narrative for Bitcoin staking.
Project operation principle
Babylon plays the role of a bridge in Bitcoin staking, connecting the Bitcoin chain and all PoS chains. The platform allows Bitcoin holders to stake their Bitcoin to support the security of the PoS blockchain without bridging it to other blockchains. Specifically, Babylon locks users’ pledged Bitcoins in specific UTXOs and sets a certain locking period to protect assets. The platform then transfers these pledged liquidity to other PoS chains for restaking, and returns the annual interest rate on PoS to users on Babylon. This model not only eliminates cross-chain risk, but also avoids the risk of relying on a third party to custody Bitcoin.
Project problem solving
The introduction of Bitcoin staking solves a long-standing problem faced by Bitcoin holders - how to utilize their assets more efficiently. Bitcoin has been the leading cryptocurrency since its inception, and the vast majority of investors have held Bitcoin at one time or another. However, after most people purchase Bitcoin, they often choose to hold it for a long time or store it on a centralized exchange.
Babylon provides users with a more diverse way to increase the utility of funds. In the past, if users wanted to increase the utilization of Bitcoin assets, they would usually choose to lend Bitcoin on centralized exchanges to earn an annual interest rate of 3-8%. Now, through Babylon’s staking mechanism, users can earn higher returns, thereby increasing their earnings.
At the same time, Babylon's remote staking model also greatly improves fund security and avoids the risk of cross-chain bridges. Cross-chain bridges have always been regarded as a security risk in the encryption field. They have been hacked many times in the past due to contract vulnerabilities, resulting in huge financial losses. If this new model adopted by Babylon can pass strict smart contract audits, it is expected to become an emerging hot spot in the field of Bitcoin staking.
