Successful Application of Taproot Upgrade in Babylon Project

The Bitcoin staking project Babylon has attracted nearly 24,000 Bitcoins, worth over $1.6 billion. Compared to CoreDAO, Babylon's application of Tapscript is more unique and closer to the original intention of Bitcoin developers. Regardless of one's views on Babylon and the emerging Bitcoin staking systems, its practice has proven that Taproot is a clever and successful upgrade for Bitcoin.

Overview of Babylon

Babylon currently has nearly 24,000 bitcoins locked, worth over $1.6 billion. The platform is backed by well-known cryptocurrency venture capital and is associated with a certain trading platform. Babylon aims to become the Bitcoin version of EigenLayer, adopting the concept of repeated staking, allowing the same batch of coins to be staked in multiple systems simultaneously for higher returns.

Staking Mechanism and Taproot Applications

Babylon staking requires creating a custom complex transaction, which essentially involves sending Bitcoin to oneself and adding an OP_Return output to provide staking details. Compared to CoreDAO, there is nothing particularly special about the contract that enables staking.

However, when redeeming staked Bitcoin, the advantages of Taproot begin to emerge. The redemption process reveals that Babylon utilizes multiple spending paths in Tapscript and the Taproot tree. The complete Taproot tree diagram shows three redemption scenarios:

1. Time Lock: Requires the signature of the staker and the OP_CSV opcode, lock period of 15 months.

2. On-demand unlocking: requires the signature of the staker and approval from the alliance, similar to cooperative exit in the Lightning Network.

3. Forfeiture: Requires signatures from the pledger, the alliance, and the "final provider".

Forfeiture Mechanism

Babylon has chosen a more difficult path by constructing a sustainable protocol through a forfeiture mechanism. Currently, the forfeiture mechanism has not been implemented, and the third redemption path in the Taproot tree has not been enabled. In the future, stakers will need to pre-sign the forfeiture redemption path, and funds may be transferred or destroyed. Before the forfeiture mechanism goes live, Babylon's staking has no counterparty risk, just like CoreDAO.

The Success of Taproot

Babylon's use of Taproot strongly rebuts the criticisms against Bitcoin Core developers. Taproot implements various new customizable spending conditions while enhancing privacy and scalability. Currently, nearly 100,000 bitcoins are stored in Taproot outputs, with adoption rates far exceeding expectations.

Babylon attracts $1.6 billion TVL using Taproot features, and its usage is not trivial but involves practical applications of large amounts of capital. Although some question the effectiveness of proof of stake and re-staking, the adoption of Taproot needs to start somewhere. In the future, projects that do not rely on token rewards may emulate Babylon's approach.

Regardless of the evaluation of Babylon, the successful implementation of Taproot proves that the ingenuity of Bitcoin developers in achieving this clever upgrade under numerous constraints is admirable. Taproot is being widely used and is undoubtedly a successful upgrade of the Bitcoin protocol.