Bitcoin Staking Protocol Babylon Reaches $1.4 Billion in TVL
The protocol allows holders to lock their Bitcoins, earn the rights to validate PoS chains, and receive yield as a return.
The Bitcoin Staking Protocol, Babylon, has recently achieved a remarkable milestone, reaching $1.4 billion in Total Value Locked (TVL) after increasing its staking cap. This project is developing a Layer 2 network atop Bitcoin and aims to enable users to stake their Bitcoin to secure various Proof of Stake (PoS) networks.
Babylon’s approach is somewhat akin to the strategies employed by other restaking protocols like EigenLayer, Symbiotic, and Karak on the Ethereum network. However, Babylon distinguishes itself by planning to establish its own blockchain, utilizing native Bitcoin as the primary asset to bolster security across other networks.
In a departure from earlier sidechain efforts to integrate Bitcoin with smart contract platforms, Babylon permits Bitcoin holders to stake their assets directly without the need to bridge to other blockchains. This is facilitated through the use of Cosmos’s Inter-Blockchain Communication (IBC) protocol and several cryptographic methods.
When engaging in staking with Babylon, users retain control of their Bitcoin. However, once staked, the Bitcoin will not be visible in one’s wallet because it is secured in a self-custodial Bitcoin Staking script that current wallets do not recognize. Importantly, control over this script remains exclusively with the user, ensuring that any transfer of funds can only occur with their explicit approval.
The staked Bitcoin is utilized to secure other PoS blockchains, with stakers receiving rewards for their contributions to network security. Nonetheless, akin to all PoS blockchains, there is a risk of slashing.
To address the absence of smart contracts, Babylon’s design necessitates that stakers use their private keys to lock and unlock their stakes, and subsequently delegate these keys to a trusted validator for a fee. Should any validator misconduct occur, it would lead to the revelation of stakers’ private keys and the potential slashing of their stakes.
Currently in its testing phase, the Babylon protocol has already sparked considerable interest within the Bitcoin community. To date, over 23,000 Bitcoins have been staked under this protocol.
Interestingly, while users can earn “points” for staking, the team explicitly states on its website that there are no incentives for participation. They also clearly indicate that these points may not be converted into tokens, nor is there any promise of issuing tokens in the future.
Despite the lack of promised incentives, many users remain hopeful about a potential airdrop. The project successfully raised $70 million in its latest funding round this May, led by Paradigm, with contributions from Bullish Capital and Polychain Capital. Some of these funds are likely to be distributed to early contributors.
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