Introduction.
Bitcoins current market value edges close to a trillion dollars, however its value has been untapped due to challenges such as scaling difficulties and lack of smart contracts. Babylon is revolutionising the way we scale bitcoin to the decentralised world. It extracts the security from Bitcoin chain and shares it with other PoS chains like Cosmos, BSC, Polygon and other chains with strong interoperable ecosystems. Babylon leverages three aspects of Bitcoin — its timestamp service, block space, and asset value.
How does Babylon interact with Bitcoin?
To realise the vision of a Bitcoin-centric decentralised world, Babylon developed a suite of Bitcoin security-sharing protocols. Right now there are two:
Timestamp Protocol
This protocol timestamps events from other blockchains onto the Bitcoin network, allowing these events to benefit from Bitcoin’s timestamp, similar to Bitcoin transactions. This effectively leverages the security of Bitcoin as a timestamp server.
Such security enables several use cases:
- Fast Unbonding: PoS blockchains require social consensus to circumvent long range attacks and this leads to long unbonding periods. Bitcoin security replaces social consensus and reduces unbonding periods to a few hours.
- Bootstrapping new zones: Bitcoin security can be used to bootstrap new zones which have low token valuation.
- Censorship resistance: Transactions that are censored can use Babylon as a backup to enter the ledger.
- Bitcoin staking: Bitcoin timestamping protocol serves as a building block for the Bitcoin staking protocol, because it provides synchronization between PoS blockchains and Bitcoin.
Bitcoin staking protocol
This allows Bitcoin holders to stake their assets in a trustworthy manner without the need to bridge to PoS chains, providing complete and slashable security guarantees. Babylon’s innovative protocol eliminates the need for bridging, encapsulating, and custodianship of already staked Bitcoins.
Babylon’s Bitcoin staking protocol achieves the following security properties:
- Fully Slashable PoS Security: In the event of a safety violation, 1/3 of the Bitcoin stake is guaranteed to be slashed.
- Staker Security: Staked bitcoins are guaranteed to be safe and withdrawable, as long as the staker (or the validator it delegates to) follows the protocol honestly.
- Staker Liquidity: Unbonding of the staked bitcoin is guaranteed to be secure and fast without the need of social consensus.
Babylon staking, a novel way for miners to generate revenue
Merge mining is the first technique, invented in 2010 by Satoshi Nakamoto, to share the security of Bitcoin. Using the merge mining technique, Bitcoin miners can simultaneously mine Bitcoin and another PoW chain without using extra energy. However, as a security sharing protocol, merge mining is threatened by a “Nothing-at-Stake” problem: in principle, miners could attack the sidechain while mining the Bitcoin chain honestly. As Bitcoin is the major source of revenue for the miners, there may not be sufficient deterrent against malicious behavior on the sidechain.
In contrast, with Bitcoin Staking, everything is at stake: malicious behavior on the PoS chain is slashable. Thus, Bitcoin staking is a much stronger security sharing technique than merge mining.
Bitcoin miners have a new way to optimise their balance sheet with extra income from the PoS mechanism. It is estimated that miners hold almost 1.8M BTC equivalent to $120B (20% of total PoS market cap), and if redirected towards providing security to PoS networks through Babylon, it would greatly impact the ecosystem while generating revenue for miners.
