BTC Liquid Staking on Babylon

What Is Babylon

Babylon introduces a new crypto economic security standard for Proof of Stake blockchains and other services by using the Bitcoin crypto staking mechanism to ensure their security and operation.

Also, Babylon provides BTC holders with the ability to participate in crypto staking without intermediaries and the need for breeches.

Babylon is the underlying infrastructure for creating a liquid Bitcoin staking and restaking ecosystem, thereby opening up new opportunities to utilize and integrate BTC into the existing ecosystem of DeFi protocols.

It’s important to note that Babylon is currently in the asset blocking phase without Proof of Stake staking rewards. This means that users will not receive rewards for their locked BTC until Proof of Stake network staking is activated.

Also note the current limits on Bitcoin crypto staking via Babylon. Currently, the Staking TVL Cap is 1000 BTC.

Proof of Work and Proof of Stake: Staking and Slashing

To understand the mechanisms of Babylon, it is necessary to know the difference between Proof of Work and Proof of Stake blockchains, as well as to understand the concept of staking as it applies to PoS networks.

The security and Proof of Work of blockchains is ensured by the work of miners, who solve complex mathematical problems with the help of special equipment. Thus, miners spend computing power and electricity to validate the workof the blockchain.

Bitcoin is the first and most famous Proof of Work blockchain. The operation and security of Proof of Stake blockchains is ensured by validators setting up special nodes to validate blockchain transactions. In addition, validators are required to deposit a certain amount of blockchain coins into a special contract.

The deposited assets are then blocked for the duration of the validator's work and can be unblocked after a certain amount of time after the validator's request. The process of depositing and blocking assets (e.g., ETH) by validators is called staking as applied to Proof of Stake blockchains.

Staking crypto acts as a key incentive for validators to work diligently, because in case of their unscrupulous behavior and attempts to attack the blockchain, the blocked funds can be confiscated through the slashing process.

Slashing is another key mechanic of Proof of Stake networks that ensures their crypto-economic security. So, while the security of Proof of Work blockchains is ensured by the work of miners, the security of Proof of Stake blockchains is ensured by the capital and rational economic behavior of validators.

The higher the value of funds blocked in staking, the higher the security of the network will be, as validators will act rationally and avoid fraud (otherwise they will suffer significant losses in the slashing process).

Bitcoin Liquid Staking via Babylon

Since BTC is not directly used for blockchain economic security and there is no staking function, Babylon presents the opportunity to use BTC in staking to secure Proof of Stake networks.

Babylon connects blockchains in need of economic security with BTC holders who want to generate additional returns on their assets.

Key participants in Bitcoin staking

Features of Bitcoin Crypto Staking Mechanism via Babylon

• Proof of Stake security with the possibility of slashing

If validators behave in bad faith, their assets can be subject to slashing.

• Staker Security

BTC stakers have the ability to withdraw funds from staking, provided they do not violate the rules and behave in good faith. Babylon allows withdrawals even if all but one validator has violated the rules (in which case the funds will be subject to slashing).

• Liquidity

The process of withdrawing BTC from staking is safe and fast, unlike withdrawing other assets from Proof of Stake networks, which can take a long time.

Remote Bitcoin Staking

Babylon also implements a mechanism for remote BTC staking.

This mechanism avoids the process of bridging BTC from the Bitcoin blockchain to the Proof of Stake network, eliminating the need to trust third parties such as BitGo for WBTC.

Remote staking crypto allows for locking BTC in the Bitcoin blockchain and initiating a slashing process in case of violations in the validation of Proof of Stake networks.

A similar mechanism is used in other solutions such as the EigenLayer ETH restaking protocol and the Cosmos ecosystem.

How To: Babylon Bitcoin Staking

If you decide to participate in BTC staking through Babylon, you need to follow a few simple steps:

• Purchase BTC on the Bitcoin blockchain

You can do this on SimpleSwap, such as exchanging USDT on the Ethereum network for native BTC.

• Connect your BTC wallet on the Babylon website

You should also accept the terms of use of the platform and familiarize yourself with other important information about Babylon's features.

• Select the staking provider to which you want to delegate BTC

You can also become a provider yourself.

• Confirm the amount of BTC you want to send to the staking and make the transaction in your wallet.
• Check the status of staking

Initially you will see the Pending status. After 10 block confirmations the status should be Overflow or Active. In case of Overflow status, initiate the process of unstaking and withdrawal of assets.

Summary

Babylon introduces a novel security framework for Proof of Stake blockchains by leveraging Bitcoin liquid staking to enhance network security.

Babylon enables BTC holders to participate in liquid staking directly, without intermediaries, and facilitates the integration of Bitcoin into decentralized finance ecosystems.

While currently in the asset-blocking phase, Babylon is working towards activating Proof of Stake network staking rewards.

Its unique remote BTC staking mechanism eliminates reliance on third-party services and offers fast and securewithdrawal options.

Babylon provides a promising solution for connecting Bitcoin with Proof of Stake networks, ensuring security through slashing mechanisms and offering opportunities for capital growth.