Babylon is a staking project that uses the underlying value of Bitcoin to secure a variety of Proof-of-Stake networks. The idea is that eventually stakers of Bitcoin on the Babylon network would, like on any other network, be compensated for securing the network. The current phase of the network provides “points” to a limited group of participant stakers. The question presents itself, why stake on a network if there are no guaranteed or immediate rewards? Let’s take a deep dive.
As Figment is one of the earliest participants in the Babylon protocol’s staking program and has been involved with dozens of other staking protocols from their beginnings, Figment wants to help you evaluate Babylon with a balanced and reasonable assessment of participating in this phase of the protocol.
Let’s take a look at why Babylon offers unique opportunities for early participants to influence a potentially huge Proof-of-Stake network opportunity while accruing points, valuable experience and insights along the way.
Why Stake Bitcoin with Babylon?
With the Babylon network in its earliest iterations of being live and on-chain, and only “points” being available as rewards to stakers in the network, what are the potential upsides to participating?
For the first Phase-1 Cap-1, only 1000 Bitcoin were allowed to be staked. Cap-1 was successful, and filled up in a matter of minutes. In the Phase-2 cap, additional Bitcoin were allowed to be staked between Bitcoin blocks 864790 to 864799 blocks. Within Cap-2, only transactions under the 500 Bitcoin would be allowed. The increase in the Bitcoin staking amount brought the staking points from the initial Cap-1 amount of 3,125 to 10,000 for Cap-2. Any Bitcoin staked beyond this cap are not eligible to accrue points, and should be un-bonded.
Cap-3 of Babylon Bitcoin staking mainnet Phase-1 is scheduled to open on 10th December, 2024, around 11AM UTC, with updated parameters. Cap-3 will be a duration-based cap that will last 1,000 BTC blocks (roughly 1 week). This means that all valid Bitcoin staking transactions that are included in this window will be accepted by the protocol, without any TVL cap. The exact block heights will be announced 3 days ahead of the opening.
For Cap-3, early stakers will earn more than the regular points – 100,000 points per block for the first 300 blocks, before returning to 21,000 points thereafter. Babylon also increased accessibility for Cap-3 by lowering the minimum stake to just 0.005 BTC, while institutional participants can stake up to 5,000 BTC per transaction. All points will be distributed proportionally among active stakes, ensuring fair rewards for all participants.
Participants are excited to be among the earliest contributors to the network in hopes that their outsized and early work to secure the network will result in them being included in any potential beneficial changes to the staking rewards program if and when it does shift to staking rewards or any other version of a compensation program.
Whether earlier stakers who have accrued Babylon points have preferred staking status or early governance rights in influencing the direction of the protocol has yet to be seen, it’s clear that if anyone could or should be involved in the staking process as it monetizes first, it would be them.
Babylon Wallets
Bablylon staking is a non-custodial process, this means you hold your Bitcoin in a wallet that you control the private keys of. If your wallet is ever compromised via malware or any other intrusion, your Bitcoin could be lost permanently.
It is critical that anyone with the intention of staking with Babylon to be intimately familiar and comfortable with how to backup their wallet properly, use it with a secure and clean computer and understand the staking steps necessary as provided here.
Babylon Slashing
The earliest phases of Babylon staking do not include slashing – however as the network progresses in size and participation, it could well be likely that this will change.
Babylon Fees
On nearly all protocols, a fee is often required to initiate a transaction. From sending a token from one wallet to another, to completing complex smart contract transactions, the user will almost always need to pay a fee in order to transact. Depending on the architecture, performance and overall value of the network associated with the protocol, these fees can range from miniscule (several cents) to significant (tens to hundreds of dollars). Bitcoin is the most valuable digital asset in the world, with a market capitalization above $1.5 trillion USD (at the time of writing this), and each individual Bitcoin being worth tens of thousands of dollars. This means that even a fraction of a Bitcoin is still worth a very significant sum of money to most people.
When staking on Babylon, a participant should consider their strategy to minimize fees during the process, as their Bitcoin would need to be moved several times potentially, as well as needing to be used for fees in interacting with the staking contracts for both bonding and un-bonding. Un-bonding fees have changed periodically with the original Phase-1 fee being 0.00064 Bitcoin, which was reduced to 0.00032 Bitcoin in Cap 2. Details of fees for Phase-3 are yet to be announced.
A Reward By Any Other Name
The value of the points accrued in the current state of Babylon staking are still unknown and the outcome of the staking program will largely be determined by the success and participation rate of the earliest phases. It’s natural to assume that early stakers will be rewarded asymmetrically compared to later participants, but there’s no clear way to know or expect that at the time of writing. However if you personally believe that the future of using Bitcoin staking to secure Proof-of-Stake networks has real value long-term, the reasons to participate should be clear to you on an individual basis and you should act accordingly.
What is more important from a strategic staking standpoint is knowing and understanding the risks, choosing a reputable provider like Figment in your staking strategy and staying abreast of and engaging with the protocols you’re involved with. Figment protocol teams work diligently to bring you the insights and data to keep you informed every step of the way.
Want to learn more, get guided step-by-step and speak to the leaders in enterprise-grade staking on Babylon? Click here to get in touch.
