What Is Babylon?

Babylon is an innovative project designed to improve the security of Proof-of-Stake (PoS) blockchains by enabling Bitcoin holders to earn yield by putting their idle Bitcoins to work to bolster the economic security of Proof-of-Stake (PoS) chains and dApps.

Key Takeaways

• Babylon is an innovative project designed to improve the security of Proof-of-Stake (PoS) blockchains by allowing Bitcoin holders to earn yield by staking their Bitcoins (BTC) to improve the economic security of PoS chains and dApps.

• Babylon leverages the three unique facets of Bitcoin, including its timestamping service, blockspace, and asset value.

• With Babylon, Bitcoin holders can participate in Proof-of-Stake security by locking up their BTC on the Bitcoin network, which is then used to provide security for various PoS ecosystems, such as Cosmos, Polygon, and Bitcoin Layer 2s.

Babylon lets users stake Bitcoin (BTC) to secure other blockchains and protocols, expanding Bitcoin’s role in the decentralized economy. This is done without the need for staked Bitcoins to be bridged, wrapped, pegged, or held in custody. It is able to achieve this by leveraging the three unique facets of Bitcoin: its timestamping service, blockspace, and asset value. The project aims to tap into security from Bitcoin, the pioneer blockchain platform, and disperse it to various PoS ecosystems, such as Cosmos, Polygon, and Bitcoin Layer 2s.

Team and Funding

The team behind Babylon features key figures and prominent scholars, including co-founders David Tse and Fisher Yu. Babylon also has a team of advisors who provide expert guidance and strategic insights. The project’s ecosystem is growing through various partnerships, including Lombard, Akash Network, Binance Web3 Wallet, Injective (INJ), Cosmos Hub, and OKX Wallet. 

Babylon has received strong support and funding, reflecting significant market confidence in its innovative approach. For instance, the project raised over $18 million from top investors, including Polychain Capital, Hack VC, OKX Ventures, Polygon Ventures, and so on, in December 2023. This substantial investment is directed toward developing Babylon’s Bitcoin staking protocol, which aims to position Bitcoin as a decentralized staking asset. 

With a strong team and substantial funding, Babylon appears to be well-positioned in the market focused on integrating Bitcoin’s security into decentralized finance (DeFi). Its unique staking protocol aims to broaden Bitcoin’s utility and strengthen the security of PoS blockchains, demonstrating the project’s commitment to on-chain integrity. 

How Does Babylon Work?

As mentioned earlier, Babylon is able to secure Proof-of-Stake chains by leveraging Bitcoin’s three unique facets; timestamping service, blockspace, and asset value. These elements form the core of Babylon’s security-sharing protocols, which include the Bitcoin staking protocol, the Bitcoin timestamping protocol, and the Bitcoin data availability protocol. 

These protocols work in tandem to ensure that Bitcoin’s robust features are effectively utilized to bolster the security and efficiency of various PoS networks. Below is a detailed explanation of these protocols and how they work.

Bitcoin Staking Protocol

Bitcoin holders can use Babylon’s Bitcoin staking protocol on PoS chains, app chains, and applications to protect the protocols and receive rewards by staking (and restaking) their BTC. Unlike the conventional staking methods, the protocol eliminates the need for the staked Bitcoins to be bridged, wrapped, or held in third-party custody. 

The staking protocol has two functions, which are somewhat interwoven. Primarily, it enhances the security of Proof-of-Stake chains and applications through Bitcoin staking. Additionally, it incentivizes Bitcoin holders — through rewards — to participate in Babylon’s security model. 

It is worth mentioning that the Babylon staking protocol claims that BTC deposited on the protocol are “as safe as they can possibly be.” For example, staked bitcoins are safe and withdrawable so long as the participant uses the protocol in good faith and does not attack the PoS chains. Moreover, Babylon claims the unbonding of the staked asset is generally safe and prompt without the need of social consensus, due to its use of the Bitcoin timestamping protocol which allows for synchronization between Bitcoin and the PoS chains.

All in all, the BTC staking protocol is designed as a modular plug-in compatible with various Proof-of-Stake chains. By integrating Bitcoin’s robust security into these other blockchains, Babylon aims to expand BTC’s utility beyond being merely a store of value or a medium of exchange.

Bitcoin Timestamping Protocol

The Bitcoin timestamping protocol is another critical component of Babylon. This protocol operates by timestamping events of other blockchains onto the Bitcoin network, effectively borrowing BTC’s security as a timestamping server. Basically, it allows any random data submitted to Babylon to obtain Bitcoin timestamps. 

The BTC timestamping protocol is particularly useful in improving the integrity and security of PoS networks and preventing long-range attacks, which occur when a malicious validator attempts to take over a blockchain with a forked false chain. With BTC timestamps, the attacking fork will have a later BTC timestamp, which will never be chosen by anyone in a fork choice. Meanwhile, it serves as the building block of the staking protocol by establishing synchronization between Bitcoin and the PoS blockchains. This also removes the need for social consensus, as Bitcoin timestamps are objective.

Moreover, the timestamping protocol facilitates cross-chain security, fast stake unbonding, reduced cost of security, composable trust, and the bootstrapping of new chains. It achieves this by combining the short-range security of Proof-of-Stake chains with the long-range security of Proof-of-Work Bitcoin.

Bitcoin Data Availability Protocol

The Bitcoin data availability protocol utilizes Bitcoin’s limited block space for vital tasks, such as providing a censorship-resistant layer for PoS chains. Bitcoin’s blockspace, known for its unparalleled security and censorship resistance, has proven to be essential in protecting the decentralized ecosystem. The data availability protocol ensures that critical data is always obtainable and secure, further enhancing the reliability and trustworthiness of PoS chains.

Problems Tackled by Babylon

Using its various mechanisms, Babylon offers various solutions to challenges affecting the broader blockchain ecosystem. Some of these include;

Establishing Protocol Security for New Chains

New blockchain platforms tend to struggle with security issues, especially in the short period following their launch. These networks are more vulnerable to exploits and often require a robust security infrastructure to maintain their integrity in the beginning.

With Babylon, newly-launched blockchains can leverage Bitcoin’s security, improving their overall stability and reliability. For instance, Babylon’s timestamping protocol can help to secure the new blockchain networks against long-range attacks by utilizing Bitcoin’s timestamps. 

Increased Capital Efficiency for Bitcoin

Babylon improves capital efficiency in the Bitcoin ecosystem by enabling BTC holders to stake their coins on PoS chains through the staking protocol. As already mentioned, the staking protocol removes the need for Bitcoin to be bridged, wrapped, or held by third parties, thereby maintaining liquidity. Ultimately, this broadens the use cases of Bitcoin in the ecosystem, from the security of PoS networks to earning incentives on staked BTC.

Fast Unbonding

On many staking protocols, the process of unstaking assets can be time-consuming. This can reduce the flexibility for participants, thereby discouraging them from parting with their assets. However, Babylon’s approach of using Bitcoin timestamping for synchronization between Bitcoin and PoS chains ensures that the unstaking process is fast and users can access their funds as quickly as possible.

Partnerships and Ecosystem

As earlier mentioned, Babylon has established a robust ecosystem through strategic partnerships with various prominent projects in the blockchain space. These partnerships are not only focused on the technology; they are also about a shared vision for a more secure and efficient decentralized future. Below are some of Babylon’s key partners and ecosystem components.

Lombard

One of Babylon’s most significant partnerships is with Lombard, a startup also focused on integrating Bitcoin into the DeFi ecosystem. With participation from Babylon, Lombard has raised $16 million in order to explore the uncharted territory of Bitcoin restaking.

Lombard is excited to announce our $16M seed round to kick-start the Bitcoin restaking ecosystem led by @polychain!

With additional participation from @babylon_chain, @daofive, @FTI_Global, @ForesightVen, @mirana, @0xMantleEco Fund, @NomadCapital_io, @OKX_Ventures, and… pic.twitter.com/QOlsrlQcz5

— Lombard (@Lombard_Finance) July 2, 2024

It is worth mentioning that the concept of restaking was first introduced on Ethereum through EigenLayer, a protocol that enables participants to restake their staked assets to secure other Ethereum applications and earn additional rewards.

This Babylon collaboration will leverage Lombard’s introduction of “liquid Bitcoin” (LBTC) tokens. This LBTC token refers to a tradeable receipt for Babylon deposits that will allow users to retain liquidity over their staked BTC.

Additionally, LBTC can be moved freely across different blockchains, providing users with flexibility and accessibility. This cross-chain capability ensures that Bitcoin holders can take advantage of DeFi opportunities across multiple platforms. 

Lombard’s partnership with Babylon is part of a broader strategy to connect PoS chains with Bitcoin-backed security, offering endless DeFi opportunities to Bitcoin holders. This integration not only benefits users but also enhances the liquidity and security of the entire ecosystem. 

Akash Network

Akash Network is a decentralized cloud infrastructure that gives users control over pricing and amenities while benefiting from efficient transactions and minimal environmental impact. The network’s partnership with Babylon helps boost its security by integrating Bitcoin’s robust features into its Proof-of-Stake (PoS) system.

These security measures enable Akash to create a more secure and cost-effective way for users to record transactions and deploy workloads. The collaboration with Babylon strengthens Akash’s market position by significantly enhancing security and efficiency.

Additionally, this partnership grants Akash Network access to Bitcoin’s reliable timestamping service and source of trust. This integration prevents double-spend attacks and allows for fast stake unbonding, providing users with greater flexibility and confidence in the security of their assets. 

Ultimately, by leveraging Babylon’s technology, Akash can offer improved scalability, accommodating the growing demands of its user base. With advanced security measures, Akash Network aims to deliver a secure and cost-effective decentralized cloud solution, continuously pushing the boundaries in decentralized cloud computing.

Cosmos Hub

The Cosmos Hub is a network of independent parallel chains designed with the Cosmos software development kit (SDK). Through the Bitcoin staking protocol, Cosmos’ partnership with Babylon allows BTC holders to stake their coins to secure the Hub’s consumer chains and earn additional rewards.

Cosmos’ blockchain ecosystem leverages Babylon’s Comet extension to enhance security aggregation to the Cosmos Hub blockchain and all consumer chains. In simpler terms, the integration of Babylon’s technology to the hubs prevents unpleasant scenarios, such as double signing.

Bitcoin Layer 2s

Although Bitcoin is arguably the most secure network in the crypto space, it still has some limitations, especially when it comes to smart contract functionality and support of other digital assets. This gap has spurred the development of Bitcoin Layer 2 solutions designed to expand Bitcoin’s capabilities. 

However, these L2s often depend on third-party custodians or multi-sig bridges to facilitate their operations, which contradicts Bitcoin’s decentralized ethos. Ultimately, this dependency can raise concerns about security and control, as users might find it difficult to trust these intermediaries to properly manage and secure their assets.

Fortunately, Babylon’s BTC staking protocol addresses these challenges by allowing users to stake their BTC directly. This enhances the security of PoS networks without the need for third-party custody or wrapping. This seamless integration benefits both the Bitcoin ecosystem and PoS networks. 

Some Layer 2 projects have started utilizing Babylon’s Bitcoin staking protocol, including Lorenzo and Bison. Lorenzo, for example, is a BTC L2 infrastructure that focuses on yield-bearing token issuance, trading, and settlement. By leveraging Babylon’s staking protocol, Lorenzo enables native rollups to integrate native BTC assets and stake BTC for yield. 

Meanwhile, Bison Network is a ZK-STARK rollup on Bitcoin that offers general programmability, allowing developers to design decentralized applications (dApps), smart contracts, and other DeFi tools. Bison basically provides Bitcoin-native smart contract functionalities, while using Babylon’s infrastructure to enhance its transaction efficiency and overall security. 

Conclusion

Babylon taps from Bitcoin’s security architecture to secure Proof-of-Stake blockchains while allowing BTC holders to earn yields safely. Its innovative staking protocol ensures strong security for PoS chains while giving users liquidity and control. This project spotlights the fact that Bitcoin is not only a store of value but can also be a trusted security backbone for other blockchains. With strategic partnerships like Lombard and Akash Network, Babylon continues to strengthen its ecosystem and expand its role within the decentralized finance industry.