Blockchain Bridges: Babylon Enables Bitcoin Staking on Proof-of-Stake Networks
A new startup called Babylon is challenging the widely accepted notion that proof-of-stake (PoS) and proof-of-work (PoW) networks cannot be combined. Led by a Stanford professor and a former Dolby engineer, Babylon aims to allow users to stake actual Bitcoin (BTC) on various PoS networks such as Ethereum, Solana, and Polygon.
The company recently raised $18 million in a funding round co-led by Polychain Capital and Hack VC. It is also in talks with multiple blockchain networks, including Polygon, for integration.
How Does It Work?
Proof-of-stake networks like Ethereum use smart contracts to govern the staking process, rewarding users who deposit ETH with accumulated rewards over time. However, smart contracts are not natively supported on the Bitcoin blockchain.
Babylon’s solution relies on Bitcoin’s “time lock” mechanism and a workaround for the smart contract problem. The team has used the existing Bitcoin scripting language to replicate the slashing process typically handled by smart contracts.
Potential Impact
If successful, Babylon’s technology could enable PoS blockchains to tap into the $838 billion worth of secure Bitcoin already in circulation for transaction validation. This could reduce the need for issuing new tokens as incentives and potentially lower security costs.
Babylon will need consent from each blockchain’s governance to provide its technology. However, it has already gained support from industry leaders like Polygon co-founder Sandeep Nailwal.
New Possibilities for BTC Holders
If PoS networks adopt Babylon’s technology, they may redefine staking BTC on their chains compared to using native tokens. Ethereum, for example, might lower the minimum BTC requirement for staking and offer different rewards rates. Regardless, the opportunity to earn passive returns on Bitcoin will likely attract BTC holders worldwide.
Hot Take: Babylon’s Innovation Challenges Conventional Wisdom
Babylon’s ambition to enable Bitcoin staking on PoS networks is a significant departure from established thinking in the blockchain space. By leveraging Bitcoin’s value and secure network, Babylon could revolutionize the staking landscape and potentially reduce security costs for PoS networks. While its vision remains theoretical for now, Babylon has secured funding and gained support from industry leaders, paving the way for a future where BTC holders can stake their coins on various PoS chains.
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