Bitcoin-staking protocol Babylon attracts $1.4B in deposits

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Babylon sees $1.4 billion in deposits

Babylon is a restaking protocol on the CometBFT consensus that saw a mainnet launch in August. 

As of today, the Babylon chain has racked up an impressive 23,000 bitcoin ($1.4 billion) staked from 25.3k stakers. That puts it in the TVL ballpark of major restaking protocols like Symbiotic ($1.5 billion) and EigenLayer ($10.7 billion).

Unlike previous sidechain attempts at bridging bitcoin to smart contract chains, Babylon offers a trustless coordination layer to do so without technically bridging bitcoin.

This is achieved through the use of Cosmos’s Inter-Blockchain Communication (IBC) protocol to communicate messages between networks, and a mix of cryptography methods like “covenants” to lock bitcoin in a time-locked self-custodial vault until conditions are fulfilled. Additionally, timestamping is used to synchronize a record of transactions on PoS chains.

To get around the lack of smart contract compatibility on the Bitcoin chain, Babylon’s design requires stakers to use their private keys to lock and unlock their stake, which is then delegated to a trusted validator for a fee.

In the event of malicious behavior, the validator’s private key is revealed and slashed with extractable one-time signatures (EOTS) — a concept that builds on Bitcoin’s Schnorr signatures algorithm.

This architecture allows bitcoin stakers to “bridge” their bitcoin into a PoS chain, and receive a yield that is paid out in the destination PoS chain’s tokens, a future feature to be implemented.

Presently, the two largest stakers are liquid restaking protocols Lombard, and Solv Protocol, which have a total delegated 7166 and 6009 bitcoin, respectively.

Solv Protocol also announced yesterday the Staking Abstraction Layer (SAL), a framework to standardize token standards across the growing number of bitcoin derivative tokens.

Due to its lack of smart contract capabilities, Bitcoin DeFi must go cross-chain. This in turn creates a need for such common standard frameworks. 

Various cross-chain token standards have been used in Ethereum DeFi to create standardization, such as LayerZero’s OFT (Omnichain Fungible Token) and Axelar’s ITS (Interchain Token Service) standard.

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