Babylon: Bitcoin Staking

Babylon’s $18M Fundraise

Babylon aligns the interests of PoS chains seeking security with Bitcoin holders looking to leverage their capital for yield generation.

Babylon Protocol is notable to us for two distinct reasons. The team 1) is working on a valuable solution and 2) recently raised an $18M Series A with participation from blue-chip investors. Said differently; we feel this team is establishing true staying power.

We drafted a short TLDR on the project below, as we feel this is one to watch.

• Babylon

  • Founded: January 2022

  • Team Size: 14

  • Location: Palo Alto, California

  • Chains: Bitcoin and 30+ Cosmos-SDK chains on testnet as of July 2023

Problem: The adoption of native Bitcoin staking faces challenges due to its limited and expensive block space. This constraint makes it unsustainable and unscalable for multiple Proof of Stake (PoS) chains to directly timestamp to Bitcoin.

Solution: Babylon has developed a secure Bitcoin timestamping protocol, implemented as a Cosmos-SDK based chain. This innovation allows for efficient timestamp aggregation for numerous Cosmos SDK chains through the standard Cosmos Inter-Blockchain Communication (IBC) protocol.

Core Differentiation: Babylon enables Bitcoin staking without the need to bridge bitcoins, a process often limited by the security risks associated with the locked asset value of the bridge project's issued token.

Key details include:

• Capital Utilization: Bitcoin, with a market value of ~$865 billion, is largely idle capital. Babylon proposes a trustless system for staking idle bitcoins to enhance the security of PoS chains and earn yield, all without the need for bridging the BTC to these chains.

• Modular Design: Babylon's architecture is designed as a modular plug-in compatible with various PoS consensus algorithms. This feature integrates BTC with the PoS economy efficiently.

• Technology Integration: Babylon's modular nature allows it to be used on top of all Byzantine Fault Tolerant (BFT) consensus protocols (such as the Ignite framework, formerly known as Tendermint) without altering the base protocols, making it adaptable across different PoS chains.

• Innovative Bitcoin Timestamping: Babylon introduces a method where PoS block hashes and the staker set voting for these blocks are recorded on the Bitcoin chain. This architecture places Babylon in a pivotal role by enabling remote staking of Bitcoin onto consumer PoS chains.

• Risk Mitigation: Current Bitcoin bridges face risks regarding the redeemability of wrapped Bitcoin tokens, often backed by less secure chains. Babylon addresses this by limiting spending operations on the locked Bitcoin solely to slashing safety violations.

We will continue to share updates as the bitcoin halving date approaches, which is the teams expected launch timeframe.

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