The Restaking Revolution: A Comparative Look at Eigenlayer and Babylon

Shared security coming near you.

The blockchain landscape is witnessing significant advancements in security models that enhance security and efficiency. Eigenlayer and Babylon are at the forefront of this development, each proposing unique solutions that expand the traditional security measures of Ethereum and Bitcoin, respectively.

This article delves into the technical aspects of both platforms, comparing how Eigenlayer extends Ethereum’s Proof of Stake (PoS) security with how Babylon extends Bitcoin’s Proof of Work (PoW) security across the broader Web3 ecosystem.

The Birth of Restaking

Restaking was largely introduced to Web3 by Eigenlayer, marking a pivotal moment in Ethereum’s evolution. The platform emerged as a response to the growing need for more versatile and robust security solutions that extend beyond the base layer of blockchain networks. Recognizing a gap, Eigenlayer was developed to specifically address these issues by enhancing the adaptability and effectiveness of Ethereum’s Proof of Stake (PoS) mechanism. This innovation opened new possibilities for security and functionality in decentralized applications (dApps), providing a vital tool for developers and validators to safeguard their projects against an increasing array of threats.

While unknown to many as Eigenlayer quickly rose to the scene, Babylon is another restaking project that was born at the same time as Eigenlayer, but that focused on Bitcoin instead of the Ethereum ecosystem.

While Eigenlayer is already in mainnet, Babylon is soon to launch mainnet as well.

Eigenlayer: Expanding Ethereum’s Security to the Application Layer

EigenLayer’s emergence as a middleware protocol atop Ethereum introduced a revolutionary approach to network security and expansion through its restaking crypto economic primitive. It provides a unique framework where staked Ethereum, or ETH liquid staking tokens (LSTs), are redeployed to secure and validate new software modules within the Ethereum ecosystem. These modules, varying from consensus protocols to oracle networks, are crucial for Ethereum’s evolution and scalability.

Key Technical Aspects:

• Restakers, Operators, and Actively Validated Services (AVS): The EigenLayer ecosystem is built upon the collaborative efforts of restakers who commit their staked ETH or LSTs, operators who maintain the network, and AVS that require distributed validation.
• Restaking: Users can participate as restakers by allocating their staked ETH directly through EigenPod contracts or by utilizing liquid restaking protocols to remain liquid while securing the network.
• Operators: These are the entities responsible for running the software on the EigenLayer platform, akin to validators in Ethereum’s PoS. They ensure the validation of transactions across the network and can also participate as restakers.
• AVS: This term encompasses a variety of services needing distributed validation, such as data availability layers and oracle networks. AVSs are integral to increasing the network’s rate of open innovation, borrowing Ethereum’s programmable trust through EigenLayer’s smart contracts.
• EigenDA: An example of an AVS, EigenDA is a decentralized data availability service designed to tackle Ethereum’s scalability challenges. It employs its own security and economic models while remaining flexible and customizable for roll-up payment structures, highlighting the potential of AVS within the EigenLayer ecosystem.

The Eigenlayer restaking mechanism extends the reach and capabilities of Ethereum’s network. Allowing staked assets to secure additional layers and services enhances the system’s overall robustness and creates new opportunities for operators and developers.

Babylon: Broadening Bitcoin’s PoW Security and Capital Efficiency

While Eigenlayer is limited to the Ethereum ecosystem with ETH as the native staking asset, Babylon has BTC as the native staking asset but is not limited to the Bitcoin ecosystem only. Babylon extends Bitcoin’s PoW security to a PoS chain, rollups, and other blockchain constructs through a comprehensive staking mode. In addition to expanding security, it also improves liquidity and capital efficiency across Web3 as BTC has, up until now, been mostly idle and subject to trust assumptions (WTBC) in order to be bridged out of BTC and into the greater Web3 ecosystem.

Key Technical Aspects

• Native Bitcoin Staking: At the heart of Babylon is the native staking protocol, which opens a gateway for Bitcoin holders to earn yield and secure PoS blockchains. This is accomplished through a Cosmos-SDK-based protocol, which emphasizes user control and maximizes liquidity without the need for intermediaries. This ensures the integration of Bitcoin-based security into PoS chains without traditional risks. It also amplifies Bitcoin’s utility, facilitating its expansion as a secure collateral across emerging PoS networks.
• Security Mechanisms: Babylon ensures full slashability for violations, guaranteeing staker sovereignty for withdrawal, and reduces unbonding time. These measures are safeguarded by cutting-edge cryptography and consensus methods, bypassing the need for bridges or third-party custodians. The protocol utilizes advanced cryptographic techniques within script “contracts” on the Bitcoin chain.
• Bitcoin Timestamping Protocol: A pivotal element of Babylon Chain’s security model is the Bitcoin Timestamping Protocol. This protocol fortifies the integrity of PoS blockchains by embedding irreversible timestamps from Bitcoin’s blockchain. It serves as a countermeasure against long-range attacks, reducing the need for protracted unbonding times, and establishing an objective consensus that dispels weak subjectivity. Furthermore, it aids in the secure bootstrapping of new PoS zones, enhances transaction security, and provides a backup for censored transactions, firmly rooting the Babylon Chain as a versatile and secure platform in the PoS landscape.
• Integration of Liquid Staking Tokens: A key aspect that is enabled by Babylon is liquid staked tokens, which introduce bitcoins into active DeFi participation on integrated chains. The most popular bitcoin-based token is Wrapped Bitcoin (WBTC) which is not an LST but more a bridge solution with risky trust assumptions, as BTC is held in multi-sig. Babylon LSTs offer a more trustless alternative for Bitcoin’s representation on any chain and will also increase the minters of liquid-staked BTC, reducing the risks of one dominant Bitcoin-backed token issuer.

Babylon elevates Bitcoin from a mere value store to an active participant in Web3's security and operational continuity. This not only broadens Bitcoin's utility horizons and improves security but also promises a new era of liquidity and yield generation for Bitcoin holders and integrated partners.

Comparative Analysis: Security Reach and Impact

While Eigenlayer focuses on enhancing the security within Ethereum’s ecosystem, Babylon’s approach is more encompassing, aiming to secure a wider array of networks through the strength of Bitcoin’s mining process. Babylon’s offering expands to the broader Web3 network, bringing Bitcoin’s security to a multitude of chains and layers, thus influencing a larger portion of the Web3 environment. The incorporation of LSTs into the Babylon design significantly enhances liquidity across chains, facilitating smoother transactions and interactions in the Web3 space. Eigenlayer’s impact on capital efficiency remains confined within Ethereum’s staking and rewards mechanisms.

Conclusion

The comparison between Babylon and Eigenlayer reveals distinct yet complementary paths toward a more secure and efficient Web3 ecosystem. Eigenlayer’s enhancement of Ethereum’s PoS through application-specific staking is a novel approach, catering to the needs of Ethereum’s validators and dApps. On the other hand, Babylon not only extends Bitcoin’s PoW security model across the Web3 spectrum ( L1s and L2s) but also advances capital efficiency and liquidity with its innovative LST system. As both models evolve, their integration and interaction may offer further possibilities for enhancing blockchain security and functionality.