Apr 13
Babylon Chain: The Bitcoin Staking Pioneer
In this article, we explore Babylon Chain, the brainchild of engineers David Tse and Fisher Yu, who seek to promote greater decentralization, utility, and security for Bitcoin and Proof-of-Stake chains.
Bitcoin heralded the cryptocurrency revolution, and while it remains the most famous application of blockchain technology, some major innovations are leaving BTC behind, chiefly decentralized finance (DeFi) and its corollaries. Bitcoin has yet to compete with Ethereum, for instance, in enhancing the utility of cryptocurrencies beyond serving as a store of value and medium of exchange.
As such, various innovative developers and entrepreneurs have taken up the challenge of bridging the gap to pave the way for Bitcoin holders to access greater utility for their coins. In this article, we explore Babylon Chain, the brainchild of engineers David Tse and Fisher Yu, who seek to promote greater decentralization, utility, and security for Bitcoin and Proof-of-Stake chains.
What is Babylon?
One of the leaders of the new wave of Bitcoin innovation is Babylon, pioneering a transformative Bitcoin Staking Protocol. While other blockchains have been well-served by starting with or transitioning to a Proof-of-Stake mechanism, Bitcoin maintains its traditional Proof-of-Work approach, oft-criticized because it does not offer as many benefits as the former. Using a staking mechanism, participants can ‘lock’ part of their tokens and earn rewards because doing so enhances the network’s security.
How Babylon Chain Works
The summary of how Babylon’s Bitcoin staking works is that it turns BTC into a stackable asset for any PoS chain.
Because Bitcoin is inherently resistant to staking, about 21 million coins are currently idle, neither providing liquidity, earning yield, nor contributing to the chain's security. Other innovators have tried to solve the challenge by providing a bridging technology that connects users’ Bitcoin assets to a PoS chain, such as the Ethereum Virtual Machine. However, with Babylon Chain, there is no bridging involved.
Instead, the chain partners with several other PoS chains and Bitcoin holders can access staking benefits by locking their assets to validate these chains, earning yields and liquidity in return. In this way, no third party is involved, and the Bitcoins remain secure unless a stacker attacks the PoS chain, in which case they will be penalized by having their stake slashed.
Bitcoin Staking
Bitcoin’s traditional PoW mechanism may be energy-intensive, but PoS chains are capital-intensive. For Babylon’s founders, there is no reason why the bulk of a $600 billion asset (Bitcoin) should be idle when it can be used to secure PoS blockchains while at the same time solving a major bane of the Bitcoin mechanism by offering liquidity to BTC holders.
With the new Bitcoin staking approach, BTC holders get to stake their coins on PoS chains by locking them in a self-custodial vault, with the Babylon Chain (which is Bitcoin-staked) connecting Bitcoin and the PoS chains.
Afterwards, later in the year, the mainnet will be launched. To participate in the testnet, users will need access to OKX and Keplr wallets, and transactions will be made using Signet bitcoins and Babylon testnet tokens. Over 100,000 users participated in the testnet during the first week. In addition, the entire code is open-source, and anyone can participate as a staker, developer, validator, etc.
Bitcoin Timestamping
This is the second major innovation being introduced by Babylon and shows the company’s dual approach. Bitcoin staking unlocks utility for assets made idle by Bitcoin’s PoW mechanism. On the other hand, Bitcoin timestamping addresses security issues with PoS mechanisms.
By checkpointing any PoS protocol onto Bitcoin, the chain accesses more capital to enhance its security, and as such, the issues are resolved. In the research paper explaining this mechanism, the Babylon team showed how they could reduce the stake withdrawal delay in PoS chains to less than 5 hours, down from weeks.
Team
Both co-founders of Babylon, David Tse and Mingchao (Fisher) Yu, are accomplished engineers who have won ample national awards and recognition for their work.
The Tse Lab, which researches blockchains, machine learning, and computational genomics at Stanford University is named for the former, who is also the principal investigator. Tse is also the inventor of the proportional-fair scheduling algorithm used in modern cellular systems and serving billions worldwide.
On his part, Yu is a former research engineer at Dolby Laboratories, where he led the formation of multimedia standards and co-authored more than 15 patents. Yu and Tse are equally driven by a strong belief in decentralization and came together to initiate new standards for Bitcoin.
Partners and Future Potential
In February 2024, Binance Labs, the global crypto exchange's venture capital arm, announced an undisclosed sum investment into Babylon. CEO David Tse said the funding will be used to hire more developers and develop the first phase of the mainnet before the end of the year. Before the Binance Labs investment, Babylon raised $33 million in seed and series A rounds within 2 years, including $18 million in 2023.
Presently, Babylon is integrated with over 50 partner chains, with the total market cap of all the partner PoS chains amounting to about $13 billion. Some chains powered by Bitcoin-backed security in Babylon’s ecosystem are Akash Network, Terra, Comdex, MAP Protocol, Osmosis, Archway, Injective, and so on. These protocols are drawn from various applications of blockchain technology, including infrastructure, DeFi, NFT, gaming, trading, wallet services, and more.
However, despite the promises of Babylon’s Bitcoin staking protocol, it is a highly technically complex mechanism. It requires the connection of multiple PoS chains, each of which might have unique mechanisms that pose integration and security challenges.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
