What is BabylonChain?

BabylonChain is a new scaling solution and shared secure marketplace for Bitcoin. BabylonChain introduces a novel form of bridgeless, in-protocol BTC staking providing economic security via Bitcoin slashability.

Babylon has two key components; the Babylon script built directly on Bitcoin as a standardized timelock contract, and BabylonChain, a Cosmos SDK appchain that allows users to build new bootstrapped rollups and applications, similar to AVSs on EigenLayer.

Protocol users can natively stake Bitcoin without bridging or moving it off of the BTC chain and receive staking rewards in altcoins. In addition to its native token, application developers can use Babylon’s security marketplace to opt into Bitcoin shared security to bootstrap new PoS chains.

What problem does BabylonChain solve?

• Bitcoin Staking Rewards: Babylon brings native staking and rewards to Bitcoin holders without requiring wrapping or bridging to another blockchain. This opens the door to staking for the largest, oldest, and most secure crypto asset for the first time; all without Bitcoin ever leaving your wallet. Expect staking rewards to come in the form of Babylon’s native token and/or AVS tokens built on top of it.
• New Use Cases for Bitcoin: Though commonly viewed as digital gold or a Store of Value, many Bitcoin holders have historically sought greater functionality and programmability for their BTC. New Bitcoin use cases have gone live with the recent popularity of Ordinals, BRC-20, and Runes token standards. Babylon’s Bitcoin secure marketplace will allow developers and users to add Bitcoin as part of the core security to a new generation of rollups, L2s, and other applications.
• Secure BTC programmability: Throughout its 15-year history, new Bitcoin scaling solutions including Wrapped Bitcoin and Lightning have attempted to add more financialization and functionality to Bitcoin, as well as greater freedom of movement across networks. However, the smart contracts and bridges used in some protocols introduce additional risks that may result in users losing all or a portion of their underlying BTC. BabylonChain brings staking rewards to Bitcoin holders without bridging or transferring BTC itself.

Bitcoin Staking Overview

Bitcoin staking flow on the Babylon testnet; Babylon docs

With Babylon, Bitcoin holders supply the economic security of their Bitcoin to BabylonChain (and applications built on top of it) in exchange for staking rewards. Conversely, malicious or non-performant behavior on the network makes staked BTC slashable, incentivizing proper staked BTC holder and validator behavior.

Compared to other Bitcoin L2s or scaling solutions, Babylon’s key differentiator is bridgeless BTC staking. Bitcoin never leaves your wallet with Babylon’s unique timestamping mechanism. Cross-chain bridging remains one of the riskiest transaction types in the entire crypto ecosystem. According to Chainalysis, in 2022, 69% of all stolen crypto funds originated from cross-chain bridging vulnerabilities. Babylon’s native Bitcoin staking removes security risks associated with bridging.

Bitcoin staking starts when a user deposits Bitcoin into a UTXO contract. Bitcoin’s relatively lightweight, non-Turing complete Script programming language allows users to submit Bitcoin to a UTXO (Unspent Transaction Output); a simple form of a smart contract. The underlying BTC can be time locked in arbitrary intervals using the UTXO contract. Once the time lock is complete a staker is free to withdraw. This contract is referenced for staking on Babylon. 

Slashing Conditions

Economic security requires slashability. Bitcoin has cryptographic Schnorr signatures that allow for the creation of public and private key pairs for individual UTXO contracts. Once Bitcoin is locked in a UTXO staking contract, Babylon’s EOTS manager functionality is enabled. EOTS (Extractable One-Time Signature), allows a Bitcoin UTXO contract to release the private key to a UTXO smart contract to the public. Anyone can then use this private key to transfer the BTC to an address of their choosing.

This type of slashing is different from other PoS chains, where slashed tokens are sent to a burn address, or future rewards are deducted from a staker’s eligibility. Babylon’s slashing mechanism is similar to optimistic rollups in some ways, where anyone can check for slashing conditions and be rewarded for finding misaligned behavior.

We are still awaiting further details on what slashable behavior on the native Babylon chain will be, but this UTXO/EOTS mechanism should allow for future bootstrapped chains to enable all kinds of in-house slashing conditions.

Timestamping

BabylonChain’s Bitcoin integration works via a concept called Bitcoin timestamping. First pioneered in a research paper co-authored by Babylon founder David Tse, timestamping allows any arbitrary data on Babylon (or any other PoS chain) to be submitted to the Bitcoin blockchain. In the case of an attack or fork on the PoS chain, users can checkpoint to previous BTC timestamps. Over time, this adds legitimacy to the PoS chain and will make attacks more economically expensive. 

In addition to the Bitcoin chain timestamp being accessible on Babylon, any Cosmos zone chain can also access Bitcoin state via an IBC relayer. Babylon expects timestamping to enable a number of use cases for integrated chains; including faster unbonding times, decreased reliance on social consensus, new chain bootstrapping, and censorship resistance. Effectively, timestamping adds BTC security to new and existing PoS chains.

Babylon Testnet & Future Plans

Babylon is currently on testnet-4. This allows users to stake Signet (BTC testnet) Bitcoin to a specific finality provider. Previous versions of testnet tested basic Bitcoin timestamp functionality and staking prior to integration with the Bitcoin testnet. 

• Figment’s finality provider address: a99172cdc13644990aabe785f1595843de7f884249a28cc3170112e7a018b0c6

After its initial testnet has been thoroughly stress-tested, Babylon will launch BabylonChain, the Cosmos SDK appchain for the protocol. We expect there may be a token (labeled BBN on testnet) to coincide with mainnet launch. After the chain’s launch, we will see AVSs, rollups, and other BTC-secured apps launch on top of the protocol, similar to EigenLayer. Additionally, Babylon will connect to other Cosmos chains on mainnet, allowing anyone in Cosmos to seamlessly integrate Bitcoin shared security.

Who Is The Babylon Team?

BabylonChain was co-founded by David Tse, a professor of Distributed Systems at Stanford University with a Ph.D. in Electrical Engineering from MIT; and CTO Fisher Yu, a postdoc distributed systems researcher at USC.

In addition to its core team of ~20, BabylonChain is advised by top crypto founders and thought leaders, including Sreeram Kannan (EigenLayer), Sunny Aggarwal (Osmosis), and Zaki Manian (Sommelier).

Babylon recently announced a $70 M pre-launch fundraise round led by Paradigm. Other investors in this round and previous rounds included top crypto investors and operators including Polychain, Breyer Capital, Framework Ventures, Hack VC, Binance Labs, and more. 

How is Figment Involved with BabylonChain?

Figment is live on BabylonChain testnet and BTC stakers will be able to stake directly to Figment’s Babylon finality provider once mainnet goes live. Bitcoin staking will be available directly in the Figment App. Stay tuned for more updates on our Bitcoin staking product offering!

If you are interested in staking Bitcoin or BabylonChain, Connect with us here for a demo. Figment offers a host of services aimed at delivering safe and reliable staking rewards for your assets. 

Our 500+ institutional clients rely on Figment to provide best-in-class staking services including seamless and easy integrations, detailed rewards reporting, insights, double sign slashing, and downtime penalty coverage. Figment’s team has extensive Bitcoin and BabylonChain knowledge intended to help dive into the specifics such as rewards and staking information. Meet with us to learn more about Bitcoin and BabylonChain staking.

The information herein is being provided to you for general informational purposes only. It is not intended to be, nor should it be relied upon as, legal, business, or investment advice. Figment undertakes no obligation to update the information herein.