The co-founder of Babylon discussed how the Bitcoin staking protocol has drawn billions of dollars in BTC as decentralized finance (DeFi) has commenced on the largest cryptocurrency network.
During the Bitcoin MENA event in Abu Dhabi, Babylon’s co-founder and chief technology officer Fisher Yu informed Cointelegraph that authentic Bitcoin DeFi “had not existed” until recently. Although BTC can be staked or wrapped and utilized in various decentralized applications (DApps), he noted that a level of trust was still necessary.
“You must place your trust in someone else,” Yu remarked. “When you engage in lending, you must hand over your Bitcoin to another person and hope that the borrower will return it. If you intend to perform some smart contract activities, then you have to move your Bitcoin to another smart chain,” he explained.
This creates counterparty risk akin to traditional or centralized finance (CeFi), as stated by Yu. “In this scenario, you also relinquish control of your Bitcoin. It is under someone else’s management, and they could potentially take off with your Bitcoin.”
Genuine Bitcoin DeFi should not depend on any external party
Yu explained that the primary advantage of DeFi over CeFi is its trustless characteristic, which removes third parties. “True DeFi” is when users can rely solely on the blockchain or the smart contract within the protocol, he remarked.
The team at Babylon claims to have developed Bitcoin staking, which allows for DeFi on Bitcoin:
“We developed Bitcoin staking to serve as a native application for Bitcoin, which doesn’t necessitate trust in any intermediary. Just like holding Bitcoin or using it for basic payments, you trust only Bitcoin and yourself. There’s no need to rely on others.”
Yu mentioned that the Bitcoin that is staked with Babylon will help secure a proof-of-stake (PoS) blockchain that the company intends to launch.
In contrast to the Ethereum or Solana blockchains, Bitcoin staking does not reward stakers with the blockchain’s native asset. Instead, stakers earn rewards in the native token of the PoS blockchain that is backed by the Bitcoin capital being staked.
Babylon has secured $3.5 billion in staked BTC
Babylon is gradually rolling out its mainnet, starting with Bitcoin holders locking their BTC. Subsequently, the company will introduce a blockchain characterized as “the first chain secured by Bitcoin staking.”
Yu revealed that during Babylon’s initial staking limit, the protocol accepted 1,000 BTC (approximately $100 million) within the span of an hour. In the second limit, the company attracted 24,000 BTC, valued at $2.3 billion at that time, in just 90 minutes.
“There were instances where individuals staked 500 Bitcoin in a single transaction because that was the maximum allowable amount,” Yu noted.
On December 10, Babylon launched the third staking cap for Bitcoin. In an announcement made on X, the Bitcoin staking protocol indicated it had already garnered $3.5 billion in staked Bitcoin.
DeFi on Bitcoin may encounter similar attack risks
While DeFi on Bitcoin is gaining momentum, Yu recognized that it would be subject to comparable vulnerabilities as those observed in the broader DeFi landscape, such as hacks and exploits:
“DeFi operates under a trustless assumption, which relies on the correct functioning of the code and the system. However, if fraud occurs in the code or a bridge system, individuals can lose their funds. So, theoretically, they are secure, but in practice, there are numerous attack vectors that can arise. Therefore, I don’t view Bitcoin DeFi as fundamentally different from the rest.”
Nevertheless, Yu indicated that Bitcoin DeFi can benefit from past experiences across the DeFi sector. “We have gained a lot of insights from them. Thus, we can adapt and improve our systems at a much quicker pace compared to other ecosystems,” Yu concluded.
Babylon Labs and SatLayer Forge Alliance to Unlock DeFi for Bitcoin
Babylon Labs, a primary developer of Bitcoin’s top staking protocol with more than $2 billion in Total Value Locked (TVL), has announced a partnership with SatLayer to enhance Bitcoin’s staking and restaking functionalities. This collaboration opens up new possibilities for Bitcoin holders by improving liquidity, shared security, and capital efficiency across various applications, infrastructures, and blockchains.
As part of this partnership, SatLayer will serve as the main restaking platform for the Babylon protocol by deploying a complex set of smart contracts on Babylon Chain with minimal trust prerequisites. These smart contracts facilitate completely programmable BTC slashing, representing a noteworthy improvement in Bitcoin’s utility within decentralized finance.
“At Babylon Labs, we are dedicated to creating a more secure and interconnected blockchain environment. This partnership with SatLayer enables us to extend Bitcoin’s strong security to a broader array of applications and infrastructures,” stated Fisher Yu, CTO of Babylon Labs.
This allows the staked Bitcoin to protect various components: not only infrastructures like PoS chains and rollups but also the entire suite of applications and infrastructure built upon it. With this partnership, the Bitcoin ecosystem will rapidly catch up to Ethereum regarding staking and restaking functionalities.
Through this collaboration, the Babylon protocol will extend over $2 billion worth of shared security from Bitcoin to PoS blockchains. The liquidity of these Bitcoins will be unlocked through existing Liquid Staking Tokens (LST) projects such as Lombard, Solv, and Bedrock. SatLayer will enhance these advantages by broadening both security and liquidity features to applications and infrastructure created within these ecosystems.
Bitcoin’s Expanding Role
Bitcoin persistently shows its strength via remarkable institutional acceptance. The emergence of Bitcoin ETFs has established new benchmarks for institutional investments, while sovereign nations are increasingly considering Bitcoin for their strategic reserves. Furthermore, significant Layer-1 networks, including Solana, are integrating Bitcoin representations like wrapped BTC and Liquid Staking Tokens (LSTs) to incorporate Bitcoin’s value into their ecosystems.
Apps Are the Future: SatLayer & Babylon at the Forefront
Applications are vital catalysts for further cryptocurrency adoption and innovation. By merging Babylon’s strong infrastructure with SatLayer’s advanced restaking functionalities, developers now possess unparalleled opportunities to create sophisticated solutions utilizing Bitcoin’s economic security and liquidity.
“Babylon Labs and SatLayer have a shared vision for Bitcoin as the foundation of decentralized ecosystems. Together, we allow applications and infrastructures to utilize Bitcoin’s unparalleled security while broadening its liquidity through programmable restaking frameworks. The debut of SatLayer’s devnet marks the beginning of a new era of Bitcoin-driven innovation for developers everywhere,” remarked Luke Xie, Co-Founder of SatLayer.
SatLayer Devnet Launch
Today, SatLayer also launches its devnet, offering extensive resources for developers eager to make use of this new infrastructure. Detailed documentation can be found at docs.satlayer.xyz. The team recently showcased their commitment to the developer community by acting as mentors, grant sponsors, and judges at the Babylon Hacker House in Bangkok (November 5-9, 2024), where over 70 developers devised innovative solutions using Babylon Chain and an early preview of SatLayer’s Bitcoin Validated Services (BVS) Framework.
Ecosystem Initiatives
To assist BVS builders in turning their ideas into reality, Babylon Labs and SatLayer are gearing up to unveil several exciting new initiatives designed to empower builders to innovate, collaborate, and expand:
- A complete incentive program aimed at ecosystem developers
- Dedicated technical assistance and resources to facilitate development
- Mentorship and support on go-to-market strategies, growth, and fundraising
- Begin developing BVS dApps on SatLayer and Babylon Chain today using the developer documentation at docs.satlayer.xyz
About Babylon
Babylon is a project dedicated to Bitcoin security-sharing protocols with the aim of creating a Bitcoin-secured decentralized world. Its most recent advancement is the world’s inaugural trustless and self-custodial Bitcoin staking protocol, allowing Bitcoin holders to stake their BTC on Proof-of-Stake (PoS) systems such as PoS chains, L2s, Data Availability (DA) layers, etc., enabling them to earn staking rewards without relying on third-party custody, bridging solutions, or wrapping services.
Babylon merges Bitcoin’s high security and broad acceptance with the efficiency and scalability of PoS systems, enhancing Bitcoin’s utility. Founded in 2022 by Stanford Professor David Tse and Dr. Fisher Yu, Babylon is led by a team of consensus protocol researchers and seasoned layer 1 engineers from around the globe.
The Babylon crypto protocol is a blockchain infrastructure solution that allows users to stake Bitcoin non-custodially to help secure proof-of-stake networks. It accomplishes this by employing a shared security model and a Bitcoin timestamping mechanism to enhance resilience against forks and long-range attacks in PoS protocols.
Since its launch in 2022, the Babylon network has successfully raised an impressive $96 million from leading funds and investors, including Binance Labs, Paradigm, Polychain, and others.
Babylon Chain Review
Babylon Chain is recognized as the first native staking protocol designed to address the primary challenges faced by PoS blockchains in safeguarding the network against forks and long-range attacks. It does this by using a shared security model that enables other protocols to benefit from Babylon Chain’s staking power, while Bitcoin-powered timestamps further bolster the integrity and security of these protocols.
Moreover, the platform offers $BTC holders a chance to stake their tokens non-custodially, eliminating the need to wrap their assets or bridge them across different networks, while earning APR in altcoins from various PoS networks.
The staking protocol of Babylonchain is constructed using the Cosmos SDK, which allows for the division of the node into multiple blocks, reducing the costs associated with checkpointing. It comprises several modules, each serving a specific function in enhancing the security of PoS networks. More details about Babylonchain’s infrastructure can be found here.
Babylon Chain token: Currently, there is no publicly available information regarding a potential token release for Babylonchain or its intended utility. However, drawing parallels with the EigenLayer case, which shares similar technology and concepts with the Babylon Bitcoin staking platform, it can be inferred that the Babylon Chain token may serve as a governance layer for the protocol.
Recently, Babylonchain concluded its public testnet and is gearing up for the mainnet launch, which will facilitate BTC staking. It is likely that, initially, the project will function as a symbiotic protocol, rewarding users for providing liquidity on its platform and on protocols built upon it, and a points system for rewards is being considered.
In light of the anticipated mainnet launch, the CoinLaunch team undertook thorough research on Babylon Chain, identifying several significant advantages and disadvantages of the project:
✅ Pros of Babylonchain:
- A compelling concept and design, with the capacity to dominate the shared security market in the future;
- More than 300,000 active users engaged in various phases of the Babylonchain testnet;
- Strong performance in social media marketing and influencer outreach;
- High ratings in public relations, search engine optimization, growth marketing, and overall marketing infrastructure;
- The organization secured an impressive $96 million from numerous leading funds such as Paradigm, Polychain, and Binance Labs;
- A robust network of supporting partners, including Binance Labs, indicating that the project’s token has a strong likelihood of being listed on major cryptocurrency exchanges;
- A knowledgeable executive team, including a co-founder who is a Stanford University professor with expertise in blockchain research and engineering.
❌ Cons of Babylonchain:
- Lack of tokenomics information;
- No detailed roadmap from the team;
- The platform has yet to undergo an audit by any security firm. Nevertheless, community managers have indicated that top-tier auditors are currently assessing the protocol.
Babylon co-founder David Tse explains the plan to unlock staking for Bitcoin
Move aside, Ethereum. Bitcoin staking has finally arrived.
This is one of the most discussed recent developments in the cryptocurrency market, and it may also offer significant potential as Bitcoin’s ecosystem grows in the wake of ETFs.
Babylon, co-founded by Stanford professor David Tse, is a key player in the Bitcoin staking movement. In a recent interview with Coinage, Tse talked about the importance and future of Bitcoin staking and responded to a Bloomberg article that referred to Babylon as a “professor chain.”
“I would rather refer to it as a ‘researcher chain,’” he stated. “Our focus is on a research perspective, aiming to make meaningful contributions to Web3 infrastructure.”
Tse’s entry into blockchain started roughly five years ago, transitioning from his background in wireless communication studies. Like many others, he was inspired to explore blockchain after reading Nakamoto’s white paper. He found Bitcoin’s core protocol to be “incredibly innovative and surprisingly straightforward.” He pointed out that this simplicity is critical for security — simpler systems tend to be more secure.
Babylon aims to introduce staking to Bitcoin, similar to Ethereum’s approach with ETH staking, by utilizing Bitcoin’s security across other proof-of-stake networks. “Bitcoin and Ethereum are the two primary cryptocurrencies. Ethereum has transitioned to proof-of-stake, while Bitcoin continues to operate on proof-of-work. This distinction is important. Ethereum holders have a built-in use case — staking ETH. Bitcoin, on the other hand, lacks this functionality, which is what we are addressing with Babylon,” Tse elaborated.
Staking provides a relatively low-risk opportunity for cryptocurrency holders to generate yield. Unlike centralized platforms like Celsius and BlockFi, both of which went bankrupt, Babylon operates on a trustless and decentralized model. Tse highlighted this aspect, saying, “We don’t take custody of anyone’s Bitcoin. Instead, we are creating a trustless protocol akin to Ethereum staking. Bitcoin holders do not need to surrender their assets to a centralized organization.”
To illustrate the potential benefits of Bitcoin staking, Tse compared it to ETH staking. “ETH staking can be viewed as a secure method for earning yield, similar to purchasing US Treasuries. We are offering a comparable low-risk option for Bitcoin holders. Our protocol guarantees that participants maintain control over their assets without needing a centralized custodian.”
Babylon’s strategy for Bitcoin staking also aligns with the broader goals of the Cosmos ecosystem, where every application can create its own chain while benefitting from Bitcoin’s security. “Bitcoin has a robust network of proof-of-work miners, but other chains require security as well. Bitcoin staking addresses this need, allowing these networks to utilize Bitcoin’s protection,” Tse explained.
Despite the technological advancements, Tse recognized the psychological hurdles faced by Bitcoin holders, especially following the failures of Celsius and BlockFi. “Our mission at Babylon is to inform the community about the importance of trustless, self-custodial solutions. Trustless systems are fundamental to Web3. It’s essential to distinguish between centralized and decentralized protocols,” he emphasized.
The enthusiasm surrounding Babylon is evident. When they launched their testnet in February, they welcomed 100,000 participants to stake within just two days. Tse also noted that their following on X has increased tenfold in the past six months. Looking ahead, Babylon intends to launch their mainnet in June, starting with a low staking cap to ensure security and gradually raising it to accommodate more participants.
Tse is hopeful about the future, observing, “There’s $1.3 trillion in Bitcoin in existence. We don’t need to reach every holder simultaneously. We will begin with those who are already familiar with Ethereum staking and gradually grow awareness and involvement.”
As Bitcoin continues to progress, initiatives like Babylon could play a vital role in unlocking new functionalities and value. The aim is not only to see Bitcoin as digital gold but to leverage its digital nature to provide more dynamic and impactful use cases.
The potential is also quite significant. If EigenLayer has surged into a multi-billion dollar endeavor by leading the re-staking initiatives within Ethereum’s $400 billion ecosystem, Babylon stands to gain significantly from the largest cryptocurrency, which is worth over three times that amount.
“I believe the opportunity is more than just three times the size of Ethereum,” Tse remarked. “Many Bitcoins are currently generating zero yield — in fact, 99% of them. We’ve spoken to numerous Bitcoin holders, and the first question we always pose is, ‘What do you do with your Bitcoin right now?’ Almost universally, the response is nothing. So, the absence of competition for alternative yield-generating methods bodes well for a protocol like ours.”
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