Bitcoin Holders Lock Up $1.4 Billion as Babylon Staking Expands

The Bitcoin staking protocol Babylon pulled in roughly 23,000 BTC on Tuesday during its second staking round—a much larger sum than the first wave, and a much smoother experience for network users since Bitcoin fees did not surge this time around.

Babylon co-founder and Stanford University professor David Tse, who helped launch the staking startup’s mainnet six weeks ago, told Decrypt that the round dubbed Cap-2 went “pretty well.” Having users delegate $1.4 billion in Bitcoin to the protocol was “certainly beyond expectations,” he said in an interview Tuesday.

Babylon has been constructing a two-sided marketplace rooted in Bitcoin’s reserves. On one side, users will be able to lock up their Bitcoin in exchange for rewards one day, while proof-of-stake networks can leverage that capital to provide security on the other.

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The project has focused on building up Babylon’s supply side before integrating with various rollups and networks, previously indicating that networks like Ethereum and Solana could benefit from Bitcoin staking. And though Tuesday’s staking round saw whopping amounts of Bitcoin delegated, the process proved far more orderly than the initial lock-up in August. 

Limiting the amount of Bitcoin staked to 1,000 BTC, the median cost per Bitcoin transaction costs skyrocketed to $132 during the first staking round. This time around, the median cost per Bitcoin transaction only rose as high as $2.37, skirting a network-wide headache for Bitcoin users.

The difference can be attributed to “updated parameters” that the protocol’s developers, Babylon Labs, set for Tuesday’s intake. Instead of limiting the number of Bitcoin that could be staked, Babylon’s developers shifted to a so-called “duration-based” approach.

During Tuesday’s 10-block window beginning at 864790, users could stake an unlimited amount of Bitcoin, while being limited to 500 BTC per transaction. Previously, users were limited to staking 0.5 BTC per transaction, with an overall cap of 1,000 BTC on the first staking round.

The parameters for Babylon’s initial staking round created a situation where speed was crucial—and people paid a premium to participate, Luxor Mining CEO Nick Hansen told Decrypt.

“When there's a limited amount of space and everybody's racing to get into that space, that produces a high time preference for transactions,” Hansen said in an interview. “The only way to speed up transactions is to increase the fee.”

The parameters were changed ahead of Tuesday’s staking round to broaden access to the protocol, Tse said, adding that there will likely be similar opportunities in the future. The delay between the first and second staking rounds was technical in nature, he explained.

“The first [round] was very small, mainly for security reasons,” he said. “We wanted to make sure our protocol was secured [and] had a bounty program to get people to attack the system.”

Babylon announced that it had completed a $70 million funding round in late May that was led by Paradigm, also drawing participation from Galaxy and Polychain Capital. The funding round followed an $18 million Series A funding round late last year.

While the project is still in its early stages, Babylon will eventually build out its own proof-of-stake network called Babylon Chain, Tse said. That network will serve as a primary “coordination layer,” he added, allowing others to tap locked Bitcoin to help secure other chains.

Edited by Andrew Hayward