Babylon Chain development

The concept of Babylon revolves around leveraging dormant bitcoins to enhance the economic security of Proof-of-Stake (PoS) chains. There is no shortage of potential opportunities to achieve this goal, considering that over 66% of circulating Bitcoins remain inactive. This is a significant progression, especially considering the current staking landscape. Indeed, many new blockchains face challenges in this area due to the limited staking resources of cryptocurrencies. This situation poses a threat to the security of these emerging blockchains. Moreover, existing cryptocurrencies rely on their own crypto assets to ensure security, which necessitates substantial capital investment for this purpose.

In response to this issue, Bitcoin (BTC) presents a solution. Building upon this, Babylon believes that new PoS blockchains will have the opportunity to inherit the security of a blockchain that is considered one of the most secure in the market.

The Foundation of PoS Blockchain Security

The achievement presented by Babylon has the potential to redefine the rules of the game for PoS blockchains. In a press release, David Tse, co-founder of Babylon, outlined the platform’s goals, envisioning the transformation of Bitcoin into a secure foundation for PoS blockchains. Integrating Bitcoin staking, while the underlying crypto asset is based on Proof-of-Work (PoW) rather than Proof-of-Stake (PoS), is Babylon’s ambition. The company aims to offer BTC holders the opportunity to secure PoS networks using their tokens, in return for earning PoS rewards. It’s a staking principle but through PoW tokens.

Traditionally, the security of PoS networks relies on staking the blockchain’s native tokens. However, Babylon sees limitations in this system, particularly the need for networks to introduce “very high inflation to pay high rewards” for staking, thus impacting the “utility of tokens and the economic health of the chain.” Therefore, the protocol publisher’s promise is to open up PoS networks to the “world’s most important crypto asset,” while simultaneously providing security “far greater than what a native token can achieve on its own.”

The fundamental truth is that PoS networks such as Ethereum and PoW networks like Bitcoin are like oil and water – they simply don’t mix without compromises like token wrapping and blockchain bridges. However, Babylon, a startup led by a Stanford professor and former Dolby engineer, intends to challenge this assertion. The company is working towards enabling users to stake bitcoins (BTC) for validating nodes across various PoS networks, including Ethereum, Solana, and Polygon. Despite initial skepticism, Babylon has made remarkable progress in achieving this seemingly improbable goal.

But how can someone stake real BTC, not a wrapped token, in a proof-of-stake network? Proof-of-Stake networks like Ethereum use smart contracts to manage the staking process, rewarding users who lock a certain amount of ETH and gradually accumulate rewards. These ETH deposits are crucial for verifying transactions on the Ethereum network. The staking process itself involves a complex network of if/then automated conditions executed by a smart contract. However, smart contracts are not natively supported in the Bitcoin blockchain. Nevertheless, Babylon claims to have found a solution.

Overcoming the barrier with Bitcoin’s “time lock”

Part of the solution is Bitcoin’s “time lock” mechanism, which allows users to lock BTC for a specific period and subsequently unlock them without relying on a third party.David Tse, co-founder of Babylon and a professor of engineering at Stanford, identified the main challenge with staking as collateral. Traditionally, a smart contract either allocates guaranteed funds to the staker if all conditions are met, or burns/reduces those funds otherwise. Tse’s team found a way to implement this process in the Bitcoin network without smart contracts.

Using the existing Bitcoin scripting language, the team devised a method for reducing collateral. Any Proof-of-Stake blockchain can utilize the $838 billion worth of highly secure bitcoins already in circulation to verify its transactions. This innovation has the potential to lead to deflation in Proof-of-Stake networks, as they will no longer need to mint as many new tokens to incentivize validation. As an example, Tse mentioned the Cosmos hub, which currently inflates its token supply by 10% for security payments. Babylon’s technology could disrupt this approach.

To integrate Babylon’s technology, Proof-of-Stake blockchain ecosystems would need to provide their consent. Currently, the company’s vision remains theoretical. However, Babylon is engaging in discussions with major proof-of-stake blockchains like Polygon and has gained support from industry leaders, including Polygon co-founder Sandeep Nailwal. Nailwal stated that Babylon’s vision aligns with his commitment to developing decentralized ecosystems by providing communities with diverse choices.

Babylon’s innovative approach, utilizing Bitcoin’s “time lock” mechanism and the existing scripting language, offers a potential solution to the longstanding challenge of staking genuine BTC in PoS networks. By gaining access to the secure Bitcoin ecosystem, Babylon’s technology can significantly enhance the security and deflationary aspects of PoS chains. If Babylon’s solution is embraced by major PoS networks like Polygon, it has the potential to redefine the parameters of Bitcoin staking, eliminating the need for staking the network’s native token. This could lead to increased demand for BTC and drive up its value as holders now have the opportunity to earn passive and guaranteed profits from their bitcoin assets. The ability to stake BTC in PoS networks expands the utility and attractiveness of Bitcoin, attracting more investors to participate in staking and potentially increasing the demand for the cryptocurrency. Additionally, this innovation may incentivize bitcoin holders to explore PoS networks and diversify their portfolios, resulting in increased trading activity and liquidity.

Overall, the progress of Babylon and the potential integration of Bitcoin into PoS networks like Polygon imply bullish implications for Bitcoin. As more PoS networks adopt this technology, it can contribute to a positive outlook for BTC, enhancing its value proposition and attracting new market participants.