On the 27th, Binance Lab, the venture capital arm of major crypto asset (virtual currency) exchange Binance, announced its investment in Bitcoin (BTC) staking protocol “Babylon”
Babylon embodies the concept of native Bitcoin staking, allowing users to stake BTC on another PoS blockchain and earn yield without using third-party custodians, bridge solutions, or wrapping services. It is a platform that makes this possible. Innovatively enhancing the economic security of PoS chains while ensuring efficient de-staking to increase liquidity for BTC holders.
Binance Labs, the venture capital and incubation arm of Binance, has invested in Babylon, a Bitcoin staking protocol that pioneered the concept of native Bitcoin staking, allowing users to stake Bitcoin on PoS blockchains and earn returns without any third-party custody, bridge solutions or wrapping services. It provides slashable economic security for PoS chains while ensuring efficient unbinding of stakes to enhance liquidity for Bitcoin holders.
Yi He, co-founder of Binance and head of Binance Labs, commented: "Bitcoin staking brings a crucial new use case to the industry and marks an important step in the convergence of Bitcoin and the proof-of-stake economy. Binance Labs' investment in Babylon represents our commitment to supporting innovative projects that are leading the Bitcoin narrative and advancing its use cases."
What is Bitcoin Staking Protocol Babylon?
Babylon is a platform that allows Bitcoin holders to trustlessly stake their Bitcoin to secure a Proof-of-Stake (PoS) chain.
According to Babylon’s official website, there are currently 91 ecological projects listed, covering 7 categories: Layer 2, DeFi, Liquidity Staking, Wallets and Custodians, Cosmos, Finality Providers, and Rollup Infrastructure. Among them:
Wallets and Custodians: Primarily mature wallets and custody solutions.
Finality providers: mainly staking services.
Cosmos: Mainly older projects in the Cosmos ecosystem.
There are relatively few new projects in these three categories. New projects are mainly concentrated in Layer 2, liquidity staking and DeFi fields:
Layer 2: Bison Labs, BSquared Network (our portfolio company), Lorenzo, Map Protocol, etc.
DeFi: Kinza Finance, LayerBank, Levana, Mars Protocol, Stroom, and Yala Finance (portfolio companies).
Liquidity staking: Bedrock, Chakra, Lombard, pSTAKE, Solv, Nomic, PumpBTC.
Additionally, we see other protocols like Satlayer building a heavy staking platform on Babylon, and Nubit leveraging Babylon to enhance its Bitcoin-native data availability layer.
With many DeFi yield projects centered around Bitcoin, the need to generate yield on idle Bitcoin is clear. We expect more projects to offer Bitcoin liquid staking services, and as the Bitcoin yield / Bitcoin DeFi narrative continues to develop, we may see funds from other ecosystems flow into Bitcoin.
The first phase of the mainnet will be launched on August 22, 2024. Following a $70 million round led by Paradigm, the launch of the Babylon Bitcoin staking mainnet represents an important milestone in integrating Bitcoin security into the Proof of Stake (PoS) ecosystem. The Babylon Bitcoin staking protocol allows systems such as PoS chains, L2, data availability layers (DA), oracles, etc. to obtain stakes from the largest decentralized crypto asset - Bitcoin.
The Babylon Bitcoin staking mainnet will be launched in phases. The upcoming first phase will address the supply side of the two-sided market, allowing Bitcoin holders to lock their Bitcoin using a self-custodial Bitcoin staking script on the Bitcoin chain. Future phases of the Bitcoin staking protocol will allow PoS networks to leverage staked Bitcoin to provide cryptoeconomic security.
Similarities and differences between Babylon and Eigenlayer
Let’s first talk about the similarities between Babylon and Eigenlayer—both projects are supported by professor-level scholars.
1.1 They are all professor coins
EigenLayer was founded by Sreeram Kannan, a former associate professor at the University of Washington. Kannan worked closely with David Tse (founder of Babylon) while he was a postdoctoral researcher at UC Berkeley and Stanford University.
Babylon, co-founded by Stanford University engineering professor David Tse, aims to use Bitcoin as collateral to support the security of other blockchains.
Babylon takes a similar approach to EigenLayer but is more focused on Bitcoin. Although both projects use a staking mechanism to improve the security of the blockchain and provide users with benefits, they have significant differences in technical architecture, revenue sources, and supported application scenarios.
1.2Babylon’s Innovation
Babylon is like giving a key to dormant Bitcoin, allowing it to participate in the staking and earnings of the PoS chain.
Babylon is an innovative project that introduces a staking mechanism for Bitcoin. It combines Bitcoin with the Proof of Stake (PoS) chain through remote staking. Traditionally, Bitcoin, as an asset in the Proof of Work (PoW) system, lacks staking functionality and cannot bring users staking benefits similar to Ethereum (ETH). The emergence of Babylon breaks this limitation, allowing Bitcoin holders to provide economic security for the PoS chain by staking BTC and obtain staking benefits. This is a major innovation in the field of Bitcoin staking, especially in avoiding cross-chain bridge security risks, because it does not require the transfer of Bitcoin to the PoS chain through traditional cross-chain methods.
About the Team
Babylon was founded in 2022 by Stanford University professors David Tse and Dr. Fisher Yu. Professor Tse is a member of the National Academy of Engineering and is known for inventing the legendary proportional fairness scheduling algorithm. Babylon is led by a team of consensus protocol researchers and experienced L1 blockchain engineers from around the world.
Investment institutions
As early as December 7, 2023, Babylon completed an $18 million Series A financing round, led by Polychain Capital and Hack VC, with participation from Framework Ventures, Polygon Ventures, Castle Island Ventures, OKX Ventures, Finality Capital, Breyer Capital and Symbolic Capital.
Binance Labs, the venture capital and incubation arm of cryptocurrency exchange Binance, has invested in Bitcoin (BTC) staking protocol Babylon. The specific investment amount has not been disclosed, and in addition, it is reported that EigenLayer founder Sreeram Kannan is also supporting the project. Sommelier Protocol co-founder Zaki Manian serves as an advisor to Babylon.
Later, it raised another US$70 million in a round led by Paradigm, with participation from Polychain Capital and the venture capital arm of cryptocurrency trading platform Bullish.
What is the future of Babylon?
Three chains in one, bright prospects
The reason why I say this is that Babylon’s “technical and narrative background” is really excellent:
1) COSMOS Chain: Babylon is rooted in Cosmos, and the concept of "security sharing" also comes from Cosmos, using Cosmos's IBC inter-chain communication. For the Cosmos chain, it is inevitable to embrace the security brought by Babylon, and it will also bring new vitality to the Cosmos system.
2) BTC chain: Babylon’s positioning target is the BTC chain. As mentioned above, Babylon can gradually activate the use of BTC in the BTC network. When holders gradually adapt to this way of making money, it will become a habit and they will be more closely integrated with Babylon.
3) ETH chain: Babylon’s concept is “same” as Eigenlayer, but due to the difference in the BTC network, Babylon has achieved self-custody, surpassing Eigenlayer in this respect. If you regard ETH as a test chain for BTC, then Eigenlayer can even be considered an experimental product of Babylon in some dimensions (this is just my opinion, please note the premise). Moreover, for EVM-based chains, it is not impossible to introduce assets such as BTC, whose “quality” exceeds that of ETH.
summary
As the technology of Bitcoin liquidity pledge and re-pledge continues to mature, future Bitcoin holders will not only rely on the rise in Bitcoin prices to increase their wealth. Through the pledge and re-pledge mechanism, they can obtain a steady stream of income through various protocols and services while maintaining their Bitcoin holdings.
In the future, we are expected to witness the birth of more multi-chain-based BTC liquidity derivatives, such as multi-chain compatible pledge tokens and more platforms that support re-pledge services, which will make the Bitcoin ecosystem more colorful. This will not only enrich the Bitcoin ecosystem, but also further promote Bitcoin from a "passive holding" asset to an "active appreciation" asset.
What are the differences in advantages between the primary and secondary markets?
As we all know, in the primary market, cash realization is very slow, which may take several months, while in the secondary market, cash realization is very fast and you can buy and sell at any time.
Therefore, the biggest advantage of the secondary market should be liquidity. It is precisely because of the existence of quick in and quick out that people in the secondary market are impetuous, while people in the primary market must look at the long term. Of course, people in the secondary market can also believe in value investment, such as holding Moutai for many years.
From this perspective, the secondary market is actually very free. You can hold for a long time or a short time. But in general, the returns from the secondary market may not be as good as those from the primary market. The participation price will be much lower than the listing price, and the low price itself is a guarantee of low risk and high returns.
Most people think that the bull market is over and the primary market is about to end. In fact, this is not the case. Choosing the primary market in a bull market is indeed a good choice. However, now is the time when the bull and bear markets are uncertain. The primary market is often the best choice for everyone. There is no need to chase the ups and downs in the secondary market. Private equity in the primary market itself is extremely low priced, so there is no need to worry at all.
The primary market often precedes the secondary market. When a hot coin is still brewing in the primary market, a large number of secondary market participants will ask where to buy it. This is the problem of information asymmetry. We know something that you don’t know, and we have something that you just want. This is the benefit brought by information asymmetry.
