As we all know, Staking and Restaking in the ETH ecosystem have always been popular tracks, contributing the vast majority of TVL in DeFi. However, because BTC lacks smart contract functions, Staking for BTC has encountered technical bottlenecks. Babylon first solved this problem by introducing Staking into the BTC ecosystem, and various BTC restaking explorations were generated based on this technology.

Simply put, Babylon (@babylon_chain) has three products in total, staking, restaking and babylon chain.

BTC Staking

EigenLayer realizes the evolution of ETH staking from 1 to 10: ETH itself can be staked, and EigenLayer makes it possible to stake again. Babylon needs to do one more step from 0 to 1 than EigenLayer: make non-staking Bitcoin stakeable first, and then stake Bitcoin again to achieve 1-10.

The basic functions required for staking are: staking, unstaking, and slashing (sharing BTC security requires honest nodes).

Staking and unstaking can be achieved through the hash time lock function. The Bitcoin scripting language allows time locks, which allows users to customize a lock period during which the Bitcoin (UTXO) cannot be transferred. For example, if a Bitcoin is given a time lock of 1,000 Bitcoin blocks, the Bitcoin will be locked for about a week, thus achieving the lock required in the pledge.

Staking penalties can be achieved through Schnorr signatures. The Schnorr signature algorithm supported by Bitcoin has an interesting property under a specific construction. If the signature holder signs two conflicting messages at the same time, anyone who sees these two sets of signatures can reverse the private key of the signature. Babylon uses this feature to construct a signature for Bitcoin holders to lock the staked Bitcoins. After locking, Bitcoin holders can use the signature to participate in the consensus of the PoS system. If he attacks the PoS system and votes randomly when participating in the consensus, his Schnorr private key can be reversed by anyone, resulting in the confiscation of his staked Bitcoins.

During the entire staking process, the Bitcoin pledger does not hand over the Bitcoin to anyone, nor does he hand over the private key to unlock the pledge to anyone, so it is completely trustless.

BTC Restaking

By recording the hash values ​​of some key data of the PoS blockchain (such as transaction hashes, important decisions or status updates) on the Bitcoin blockchain, a "checkpoint" (also a variant of inscription) is established. Babylon can provide an unalterable timestamp proof for these data, which is equivalent to regularly anchoring a snapshot of the PoS chain state to the Bitcoin blockchain.

The main participants of PoS network staking include coin holders, validator nodes, wallets, etc. When the Bitcoin staking protocol was introduced, coin holders were expanded to Bitcoin holders, and validator nodes could choose to run validation nodes or run finality providers supported by Bitcoin staking. Wallets need to seamlessly support multiple currencies, including Bitcoin and PoS native tokens.

DA nodes, blockchain BP nodes, are typical application scenarios for BTC Restaking.

Balylon Chain

In order to use the restaking function, Babylon first built a chain using the Cosmos SDK and applied the staked BTC to the BP node of this chain. Because Cosmos IBC itself is a cross-chain network and technology stack, Babylon's own restaking function is only applicable to other public chains based on Cosmos.

Because currently Babylon has only completed the BTC staking function, and restaking has only been implemented on the public chain based on Cosmos, this provides opportunities for other projects.

Chakra

Chakra (@ChakraChain) also developed the restaking function based on Babylon. The only difference is that Chakra uses the Starkware technology stack instead of Cosmos.

1. Use Babylon to pledge BTC and generate a staking event

2. Generate ZKP for staking events using Chakra (Starkware)

3. Staking ZKP is verified by nodes, thus providing security protection.

4. Use starkware sdk to make a chain.

Lorenzo Protocol

Lorenzo (@LorenzoProtocol) also does restaking based on Babylon staking, and also uses Cosmos SDK to build a chain, but the innovation lies in the financial aspect. It splits the stBTC generated by staking into two, generating two tokens.

LPT (Liquid Principal Tokens): Tokens with the same value as stBTC

YAT (Yield Accruing Tokens): Interest Tokens

This innovative approach allows the Lorenzo Protocol to separate principal investment from returns, providing users with flexibility in managing risk and return. This model can attract a variety of stakeholders, including those who want to trade returns independently of principal, or those who seek to accumulate specific types of assets as a strategy.