Babylon, A New Storm in the Crypto Circle?

Recently, while researching the cryptocurrency market, I discovered an interesting project - Babylon. Let me pose a question: If you hold Bitcoin, besides waiting for its price to rise, how else can you maximize its value?

What Exactly is Babylon

Babylon is an innovative protocol aimed at utilizing Bitcoin's security to provide security guarantees for other PoS (Proof of Stake) chains, creating significant waves in the entire cryptocurrency field. Through its unique design, it allows Bitcoin holders to stake their idle Bitcoin, thereby enhancing the security of PoS chains, while stakers can also earn rewards in the process.

To better understand Babylon, we can compare it to Eigenlayer in the Ethereum ecosystem. Eigenlayer's emergence has given Ethereum's staked assets more utility, enabling them to provide security for other applications while bringing additional income to participants. In the Bitcoin ecosystem, Babylon plays a similar role, extending Bitcoin's security, safeguarding PoS chains, and breaking through the limitations of underutilized Bitcoin assets.

From a technical architecture perspective, the core of the Babylon protocol is the Babylon blockchain, a PoS blockchain built on Cosmos SDK and compatible with Cosmos IBC. This feature enables data aggregation and communication between the Bitcoin chain and other Cosmos application chains. Simply put, it acts like a bridge connecting the Bitcoin chain and numerous PoS chains, promoting interoperability between different blockchains and allowing Bitcoin's value and security to circulate and be applied more broadly.

In practical application, Babylon can provide a secure, cross-chain-free, and custodian-free native staking solution for PoS chains, including BTC Layer 2. Previously, Bitcoin was mostly used as a store of value or for trading profits. However, with Babylon, users can stake their Bitcoin, contributing to the security of PoS chains while earning staking rewards, similar to depositing money in a bank and earning interest - except here, the "bank" is the blockchain world, and the "interest" is the staking rewards.

For example, suppose user A holds a certain amount of Bitcoin. Traditionally, these bitcoins might just sit in the wallet, with no income method besides waiting for price appreciation. But in Babylon's ecosystem, user A can stake their Bitcoin in the Babylon protocol, supporting the operation of PoS chains. With Bitcoin staking support, the PoS chain's security is significantly enhanced, attracting more users and developers, thus forming a virtuous cycle.

In addition to these two core members, the team includes developers, researchers, and industry experts from different countries. The advisory team is equally strong, including Sunny Aggarwal, co-founder of Osmosis lab, and Sreeram Kannan, founder of Eigenlayer, a leading Ethereum staking track, among others. The joining of these industry veterans brings rich industry experience and extensive network resources to the team, providing advice and guidance from different perspectives to help Babylon continuously advance in technological innovation and market expansion.

Investment Situation

Babylon has achieved remarkable success in fundraising, gaining favor and support from numerous top-tier venture capital firms.

In December 2024, Babylon completed a massive $70 million financing round, led by Paradigm, a leading VC focusing on blockchain infrastructure. Polychain Capital also actively participated, a venture capital firm that has previously supported multiple successful DeFi and Layer 2 projects, with rich experience and keen insights in crypto investments. Additionally, well-known institutions such as Bullish Capital and Galaxy also joined in. As early as November 2024, Babylon had already received seed funding from Paradigm and Polychain, though the specific amount was not disclosed but is considered part of the $70 million financing. Earlier, on December 7, 2023, Polychain Capital and Hack VC led Babylon Chain's $18 million Series A financing, with numerous institutions following, including Framework Ventures, Polygon Ventures, Castle Island Ventures, and OKX Ventures. These financings not only provided Babylon with ample funds to invest heavily in technological R&D, team expansion, and market promotion but also brought valuable strategic resources through the investors' industry influence and extensive network. For example, investors can help Babylon establish cooperation with other projects, expand business channels, and enhance the project's visibility and recognition in the industry.

What About Future Potential?

Market Potential

From a market potential perspective, Babylon's development prospects are extremely broad. In terms of Total Value Locked (TVL), if we reference the ratio of Eigenlayer to ETH market cap in the Ethereum ecosystem, Eigenlayer's TVL is $14.7 billion, while ETH's market cap is around $350 billion, representing 4.2%. With BTC's current market cap of approximately $1.3 trillion, calculating with the same ratio, Babylon's potential future TVL could reach $50 billion. This is a staggering figure that, under current market conditions, would even surpass USDC's market cap, second only to SOL. Even if the ratio is only half, that would still be over $20 billion in TVL. Moreover, these locked assets are high-quality assets like Bitcoin, with higher value and stability, making them incredibly attractive to the market.

Looking at Fully Diluted Valuation (FDV), compared to Eigenlayer, considering Babylon's unique position in the Bitcoin ecosystem and Bitcoin's own value and influence, Babylon's future FDV is unlikely to be lower than Eigenlayer's. Compared to ARB, although their business logics differ, Babylon's innovation and transformative market impact make its expectations even more promising. Theoretically, its valuation should not be lower than ARB's, which is $10 billion. As the Bitcoin ecosystem continues to develop and Babylon's own ecosystem improves, attracting more users and funds, its TVL and FDV may further grow, potentially securing a significant place in the cryptocurrency market.

However, Babylon faces numerous challenges in its development. In terms of market competition, despite its innovativeness, the cryptocurrency field has always been fiercely competitive, with new projects constantly emerging. Projects like Goat Network, for instance, can quickly expand BTC Layer 2 POS chains through ZK technology and introduce decentralized Sequencer native mining rewards, offering more competitive advantages in liquidity management and technological security consensus. These competitors might seize Babylon's market share, competing for users and funds.

User education is also a significant challenge. Bitcoin holders have long adhered to the "not your key, not your coin" principle, placing great importance on asset control. While Babylon's staking model achieves self-custody and ensures user asset control, users accustomed to traditional Bitcoin holding methods will still need time to accept this new staking and interest-earning approach. How to help users understand Babylon's advantages and security, and alleviate their concerns, is a crucial issue in the promotion process.

Institutional participation is equally critical. Although Babylon has already gained support from some top-tier venture capital firms, achieving larger-scale development requires attracting more institutional investors. Institutional investors are typically more cautious in decision-making, strictly evaluating a project's security, stability, and compliance. Babylon needs to meet various institutional investor requirements, providing comprehensive risk management and compliance solutions to potentially gain more institutional favor. Any issues, such as technical vulnerabilities threatening asset security or compliance flaws, could trigger a market trust crisis, leading to user and fund outflows and severely impacting the project's development.

Is Babylon's Future Boundless?

With its innovative Bitcoin staking protocol, powerful team, and robust capital support, Babylon has demonstrated immense potential in the cryptocurrency field. It brings new vitality to the Bitcoin ecosystem, promising to change how Bitcoin assets are utilized and promote the development of the entire crypto ecosystem.

However, the path forward is not smooth. Market competition pressures, user education challenges, and uncertainties in institutional participation are like barriers on Babylon's development journey. Whether it can successfully break through these challenges and find its coordinates in the vast crypto universe, becoming a project with far-reaching influence like Bitcoin and Ethereum, remains to be seen.

Returning to the initial question, you should now understand that in Babylon's world, Bitcoin is no longer just a dormant digital asset but can generate more value for holders through staking. Regarding Babylon, how do you think it will develop in the future? Will it surge ahead or encounter setbacks? What are your thoughts on the future direction of cryptocurrencies? We welcome you to share your views in the comments section and explore this world of infinite possibilities together.