A New Chapter in Bitcoin Staking: How Babylon Achieves the Fusion of PoW and PoS

The Babylon project aims to allow BTC holders to provide additional security for other PoS blockchains through remote 质押 without leaving the Bitcoin network, and to obtain corresponding returns. This innovative solution cleverly combines the economic security of Bitcoin with the Cosmos IBC cross-chain communication technology, adding an extra layer of PoW security to PoS networks.

Core Mechanism

1. Remote stake: BTC remains on the Bitcoin mainnet, no need to transfer to other chains.

2. Customized staking contracts: Use Bitcoin scripts and restrictions to create special transaction types to achieve staking lock-in functionality.

3. IBC Cross-Chain Communication: Transmitting messages and data between Bitcoin and other blockchains.

4. Security Layer Enhancement: Key data hashes of the PoS chain are recorded onto the Bitcoin blockchain to form "checkpoints," providing immutable timestamp proof for the data.

Technical Implementation

Babylon serves as an aggregation layer, connecting the Bitcoin mainnet, the IBC communication protocol, and the target PoS chain. Stakers lock BTC on Bitcoin, key data from the Babylon aggregated PoS chain, and regularly send it to the Bitcoin network via IBC to establish "checkpoints."

Remote staking is achieved through improved Bitcoin scripts and specific transaction types, avoiding traditional asset transfers or centralized services. Babylon utilizes Bitcoin's UTXO model, customizing UTXO operations to create specific contract logic.

The data verification process includes: PoS chain nodes generating important data hashes, Babylon collecting and packaging these hashes, submitting them to the Bitcoin blockchain through IBC, generating a timestamp "checkpoint", and the PoS chain can use these timestamps to verify the correctness and timeliness of the data.

Security Mechanism

Babylon uses Schnorr signatures and EOTS( to extract one-time signatures ) to ensure the mechanism operates and implements penalties. If the staker attempts a double spending attack, their private key will be exposed, and anyone can send a burn transaction to destroy the staked BTC.

Market Potential

Currently, the single-coin yield market for Bitcoin is mostly between 0.01% and 1.5%, while Babylon has the potential to offer a yield close to 8%. Considering the enormous scale of idle BTC, with 25% of the BTC supply sitting idle for more than 5 years, Babylon may attract a large number of BTC holders to participate in staking, and the market size is expected to reach several billion dollars.

Problems Solved

1. Achieve native stake of BTC on the Bitcoin network, providing higher returns.
2. Reduce the security budget and token emission of the PoS chain.
3. Provide PoW security supplements for PoS chains to mitigate "long-range attacks".
4. Increase the activity attack threshold of the PoS chain.

Comparison with Eigenlayer

• Limitation: Lack of smart contract support, functionality is relatively restricted.
• Advantages: Targeting the idle BTC market, with huge potential.
• Similarities: Provide economic security support for small-scale PoS chains.
• Differences: Babylon focuses on mitigating long-range attacks and shortening the stake lock-up period, while Eigenlayer relies on the Ethereum ecosystem, with a broader application scope.

Babylon introduces Bitcoin's PoW strong consensus into the PoS domain through innovative methods, providing new ideas for blockchain security. With the project's development, it is expected to unlock more possibilities and promote further integration of PoW and PoS.