According to Bloomberg, the recent fundraise by crypto venture capital firm indicates a renewed interest in Bitcoin-focused projects. This shift is seen as a move away from Ethereum and other blockchains, which are traditionally easier to run software such as decentralized finance applications. The success of Ordinals, a type of nonfungible tokens now on the oldest blockchain, has spurred increased interest in building within the Bitcoin ecosystem.
"Bitcoin is undergoing a renaissance with a new wave of projects building on it," said Tse in an interview. Over the years, the developer community had shifted away from Bitcoin to new chains, but recently, attention has returned to Bitcoin for multiple reasons. This interest was further fueled by the approval and launch of Bitcoin exchange-traded funds in the US earlier this year, as well as the Bitcoin 'halving' event in April, which reduced the mining reward by half.
Babylon, a new project, aims to enable Bitcoin as a 'staking' asset to secure other blockchains. Staking, a mechanism that runs Ethereum and other proof-of-stake blockchains, involves locking up deposits of cryptocurrency to validate transactions and secure the network in exchange for rewards. Unlike Ethereum, Bitcoin is a proof-of-work blockchain that involves miners solving complex puzzles to validate transactions. Babylon's goal is to allow Bitcoin holders to participate in validating transactions on proof-of-stake networks, while earning yields on their otherwise idle Bitcoin.
"Our project is analogous to Ethereum’s staking, but for Bitcoin," Tse explained. For Babylon and its investors, the incentive to make Bitcoin a staking asset is significant, as many Bitcoin holders have long wanted to generate yield from their Bitcoin. Returns are generated elsewhere in the digital-asset sector, especially after Ethereum completed a key revamp of its network called the Merge, transforming the blockchain to a more energy-efficient proof-of-stake setup.
Tse emphasized the importance of security in the crypto Web3, advocating that Bitcoin, being a large asset, can underwrite the security layer for the entire Web3 ecosystem. Staking is one of the most lucrative corners of the digital-asset sector. Among the top three projects in decentralized finance by total value of cryptocurrencies sent to the platform, two of them, Lido Finance and EigenLayer, fall under the staking category. Users have sent more than $50 billion in crypto combined to the two projects, partly to generate returns, according to data tracker DefiLlama.
