Yesterday, someone asked how $BTC of POW can achieve staking income.
Because it is different from $ETH of POS mechanism, under POS mechanism, the more token owners become network validators, the greater the probability. Thus earning newly generated tokens and transaction fees on the chain.
However, tokens belonging to POW have no relevant attributes, and can only increase the mining probability according to the computing power of the mining machine. So today I found some information to share with you.
The first step of $BTC staking is to lock the coins in a self-custodial vault using a staking transaction. This will create a UTXO (unspent transaction output) with two conditions: a time lock and a special extractable one-time signature (EOTS).
In the case of delegation, EOTS is owned by the validator of your choice. This ensures that the validator can participate in the staking process on your behalf while maintaining security and integrity.
Once confirmed, you or your validator can start validating the PoS chain with the EOTS key. In the case of honest behavior, stakers can earn returns and can unbond by waiting for a time lock or submitting an unbonding transaction to reclaim BTC after a set period of time.
Babylon has also developed a control and punishment mechanism for misconduct, which exposes the validator's EOTS key, allowing anyone to burn the staked BTC through a slashing transaction. This can punish malicious activities and maintain system security.
Slashing explanation: If the PoS system is attacked, at least 1/3 of the stake will be held accountable and identified as malicious. The protocol supports partial slashing, so only a portion of the staked Bitcoin will be slashed, and the percentage can be adjusted according to the protocol settings.
Overall, Babylon's Bitcoin staking protocol ensures strong security through the following key guarantees:
• Slashing: At least 1/3 of the Bitcoin stake will be held accountable, and a certain percentage of Bitcoin will be slashed in case of security violations.
• Staker security: If the protocol is followed honestly, the staked Bitcoin remains safe and withdrawable.
• Staker liquidity: Unbonding is safe and fast, without the need for social consensus.
