Original | Odaily Planet Daily (@OdailyChina)
Author: Golem (@web3_golem)
Last night, Babylon launched the first phase of Bitcoin staking on the main network. In just over 3 hours, the staking limit of 1,000 BTC was reached, and the final number of users participating in the staking was about 12,700. Due to fierce competition, the transaction fee of the Bitcoin network has rarely exceeded 1,000 satoshis/byte. The last time such a "grand occasion" appeared on the Bitcoin network was 4 months ago when Runes was just launched on the main network.
The pledge regulations set the upper limit of each pledge transaction at 0.05 BTC and the lower limit at 0.005 BTC. According to mempool data, the median transaction fee during the pledge opening period last night exceeded 130 USDT (about 0.002 BTC). Even if each pledge reaches the maximum limit of 0.05 BTC, the transaction Gas loss exceeds 4% of the principal, which makes retail investors say that they can't afford it.
So why can Babylon raise the on-chain fees on its own? What is the reason why the first staking activity caused players to feel FOMO? Odaily Planet Daily will explain it below.
Endorsed by well-known overseas VC
Babylon's financing background is relatively luxurious in the entire Bitcoin ecosystem. Its total financing amount reaches 96 million US dollars. Investors include well-known VCs and institutions in China and the West, such as Paradigm, Polychain, HashKey Capital, IOSG Ventures, Amber Group, Galaxy Digital, Binance Labs, Hack VC, IOSG Ventures, OKX Ventures and ABCDE Capital.
In its latest round of financing on May 30 this year, Babylon was not only valued at US$800 million, but was also led by the well-known VC Paradigm.
Since the emergence of the Bitcoin ecosystem, there has been a rather strange phenomenon: compared with the large investments in Ethereum and other ecosystems, well-known overseas crypto VCs such as Paradigm, a16z Crypto, Dragonfly and Coinbase Ventures rarely invest in projects in the Bitcoin ecosystem.
In the crypto circle, projects that receive investments from top crypto VCs and exchanges are more likely to attract attention. This is because top VCs not only invest large amounts of money and resources in projects, but also generally conduct due diligence on the projects and the tracks they belong to. Therefore, most users regard the investment catalog of top VCs as a "reliable project screening list."
Among the many Bitcoin L2s, according to public information, the only ones that have received investment from well-known overseas VCs and institutions are BOB and QED. And among the protocols or applications based on the Bitcoin mainnet, the only one that has received investment from well-known overseas VCs is Babylon. This is also Paradigm’s first investment in the Bitcoin ecosystem, which further strengthens people’s confidence in Babylon.
The first pledge limit and exclusive points reward
In addition to the investment from top VCs that made Babylon popular among users, the direct reason why the on-chain Gas soared due to the first phase of Babylon mainnet staking was the staking limit and the exclusive points reward for the first phase.
According to Babylon's official introduction, for security reasons, the total staking limit in the first phase is 1,000 bitcoins, and staking is accepted on a first-come, first-served basis, meaning that as long as the staking amount reaches the limit, users can increase the Gas amount to get the staking quota first.
However, this reason alone is not enough to make players rush to grab the "first mine". Although the upper limit of 1,000 bitcoins will be relaxed in the future, the exclusive point reward set by Babylon for this 1,000 bitcoin upper limit is the biggest reason for the market FOMO.
Because there will be no direct rewards for staking in the first phase, Babylon has designed a points system to motivate players to stake. During the period when 1,000 bitcoins are staked, 3,125 points will be generated for each bitcoin block, which will be distributed proportionally to all staking addresses during the staking period. For example, if an address stakes 0.05 BTC, it can earn 3,125*0.05/1,000 = 0.15625 points for each bitcoin block.
At the same time, the official said that the 3125 points reward is only applicable to the initial 1000 bitcoins pledged. The points may be adjusted as the pledge limit is relaxed. Although the official has not yet revealed whether the subsequent points reward will be reduced, in general, the points reward will be diluted after the participation limit and the number of participants increase.
Telling "a beautiful story"
“Not your keys, not your coins” is regarded as one of the core concepts of encryption. Especially for long-term Bitcoin holders, in order to ensure the safety of their property, they would rather keep their Bitcoin in cold wallets than put it in exchanges or third parties such as L2 to enjoy financial benefits such as liquidity mining. This concept has led to the inability to release the liquidity of tens of thousands of Bitcoins.
Babylon's slogan is to unlock the liquidity of 21 million BTC through staking. The specific implementation method is that it has developed a self-custody staking solution that allows BTC holders to stake Bitcoin and earn interest without trusting any third party. This is undoubtedly a very "beautiful" story for Bitcoin holders, which largely alleviates the concerns of not daring to use BTC to earn extra income due to unconditional trust in third parties.
Judging from the fact that TVL worth about US$60 million (1,000 BTC) was accumulated in just 3 hours last night, the market has already bought into this "beautiful" story.
