Babylon Overview: Strengthening PoS with Bitcoin Staking

of-Stake (PoS) blockchains. By allowing BTC holders to stake their assets and earn rewards, Babylon connects Bitcoin to PoS networks while boosting security. In this article, we’ll explore Babylon’s architecture, Babylon staking model, and the unique benefits it brings to the blockchain ecosystem.

Why does Web3 need Babylon?

Back in 2022, Fisher Yu and David Tse envisioned a plan to leverage the PoW (Proof-of-Work) security of Bitcoin. They also wanted to put to use the Bitcoin that was sitting idle in private wallets. The fruit of this plan was Babylon, a chain that allowed for slashable economic security guarantees to the PoS chains. At the same time, it ensures efficient stake unbonding to increase liquidity for holders.

PoS (Proof-of-Stake) has been the technology of choice because of its cost-effectiveness, efficiency, and lower energy consumption. The PoW algorithm on the other hand that Bitcoin uses presents a gap in the market, and Babylon is now here to fill it up. No longer will the trillion-dollar asset remain idle in people’s wallets.

Natively Bitcoin does not have smart contract capabilities so it hasn’t had the surge in use like Ethereum and Binance Chain have. Even when it has to be bridged to other protocols, there are latent trust issues with the counterparties holding your original tokens.

Babylon has cleverly identified this market gap and is aiming to use BTC to secure PoS chains without going through the hassle of bridging. This staking will work similarly to the ones on other PoS chains where the staker will earn rewards from the staking.

Unlocking the Power of Bitcoin with Babylon Staking

Other than the fact that it allows you to earn yields from your previously idle Bitcoins, Babylon has other pros working in its favor.

Slashable Security for Protection

If you commit a safety violation on the PoS chain when you are staking your tokens, ⅓ of the stake is guaranteed to be slashed. Meaning that ⅓ of the stake is sent to a burn address, never to be recovered.

Guaranteed Withdrawal Rights

Every person who stakes with Babylon is guaranteed to be able to withdraw their funds, even if all the other stakers have been dishonest. This method of trustless staking prevents the protocol from censoring withdrawals at any time.

Swift Unbonding Process

When you put in a request to unbond your Bitcoins, your coins will be back in your wallet in a matter of days rather than the several weeks it takes on a chain like Ethereum. Other protocols do unbonding by using social consensus to not fall prey to long-range attacks. With Babylon, your stake distribution is maintained on-chain and is not affected by these attacks.

How do you stake your Bitcoin with Babylon?

Let's say you have 1 BTC and you want to stake it on a PoS chain via Babylon. Here are the steps you should follow to get it done successfully.

Step 1: Enter into a staking contract

This is done by sending a staking transaction to the Bitcoin chain. It signals your intent to lock up your asset in a self-custodian vault. Once the transaction goes through, your vault can only be unlocked using your private key. This will happen due to either of these two reasons:

• You issue an unbonding transaction signalling your intent to unstake your locked Bitcoin. Provided you have not caused any infractions in the time your asset was staked, you should have your 1 BTC along with your staking reward back in a matter of days.

• You or the contract you entered into initiates a slashing transaction. This will send your Bitcoin to a burn address, never to be found again.

Step 2: Validate the PoS chain

Once the Bitcoin is staked, you can then begin to validate transactions for the PoS chain you staked on. This is done by using your private key. From here, you have two paths as well:

• If you do everything honestly and want to unstake, you can send the unbonding transactions to the Bitcoin chain. Once approved, your validation duties come to an end and you will get your 1 BTC along with your staking reward in a matter of days.

• If you have been malicious while carrying out your duties as a validator, the protocol makes sure that your private key is made public. With this information, anyone can send Alice’s staked tokens to the burn address. This path is supposed to act as a deterrent as well as a punishment for malicious actors.

How does Babylon do what it does?

When you stake with Babylon, you don’t have to be worried about third-party custody, bridges, or wrapping. This is because it works as a modular plug-in that can be added to different PoS consensus protocols.

At the core of this plug-in is the ‘control plane’ which manages the following functions.

Securing PoS with Timestamping

This service embeds data at a specific point in time on the Bitcoin chain. Here, the PoS chain data is written onto the more robust PoW chain to use its security. Direct timestamping on the Bitcoin chain is not possible due to the limited and expensive block space.

So, to provide this service, the ‘control plane’ or Babylon Chain aggregates all these timestamps from the supported PoS chains. This keeps an immutable record of all the PoS data on the Bitcoin blockchain.