There are several important truths that govern popular thinking about blockchain networks. One such truth is that without compromises such as wrapped tokens or blockchain bridges; Proof of Stake Network like Ethereum and proof of work network like Bitcoin Water and oil are the same and do not mix.
Now, a startup led by a Stanford University professor and former Dolby engineer is trying to disprove this. Babylon allows users to stake Bitcoin (BTC) and exchange it for Ethereum, Solana, polygonis already well on its way to achieving that seemingly impossible goal.
The company just $18 million funding round It is co-led by Polychain Capital and Hack VC, with participation from funds including Framework Ventures, Polygon Ventures, OKX Ventures, and Castle Island Ventures. He also confirmed that the Polygon Labs spokesperson confirmed that the company is in ongoing discussions with multiple blockchain networks to integrate its services, including Polygon. Decryption.
How is it possible, even in theory, for someone to stake BTC (actual BTC, not wrapped tokens using a blockchain bridge) on a proof-of-stake network? Is it? Proof-of-stake networks like Ethereum are smart contract It manages the staking process and rewards users who deposit a certain amount of ETH with accruing rewards over time.
Instead, these ETH deposits are used to validate transactions on the Ethereum network. The entire staking process is a complex web of if/then conditions that are automatically executed by smart contracts.
However, smart contracts are not natively supported on the Bitcoin blockchain, but Babylon says it has found a workaround.
The solution relies in part on Bitcoin’s “time-lock” mechanism, which allows users to deposit a certain amount of BTC for a fixed period of time and then withdraw it after that period without relying on a third party. But Babylon also needed to find a way around thorny smart contract issues.
“The biggest challenge with staking is that it’s collateral,” said Babylon co-founder David Tse, a Stanford University engineering professor. Decryption. “In other words, you need to be able to slash Bitcoin when a validator on a proof-of-stake chain is doing something wrong.”
Typically, smart contracts will release collateralized funds to stakers if all conditions are met, and burn (or slash) those funds if conditions are not met. Tse said his team was able to replicate the process on the Bitcoin network without using smart contracts.
“We came up with a way to run Slash using the existing Bitcoin scripting language,” Tse said. “That is the main innovation of this project.”
If Tse and his team actually get this right (he says there are still final technical tweaks to be done), the potential benefits could be huge.
Proof-of-stake blockchains of all kinds could leverage the $838 billion worth of incredibly secure Bitcoin already in circulation to verify transactions. This innovation would eliminate the need to issue large numbers of new tokens to facilitate verification, and would be an almost certain path to deflation for any proof-of-stake network.
” universe The hub pays around 10% as a security payment for Cosmos (inflating the token by 10%),” Tse said, citing an example. “Introducing Bitcoin has the potential to significantly reduce security costs, as it is a much larger source of capital.”
Babylon cannot contribute its technology to a particular proof-of-stake blockchain ecosystem until blockchain governance agrees. Therefore, for now, the company’s vision is still theoretical.
However, as mentioned above, Babylon is currently in serious talks with major proof-of-stake blockchains like Polygon, and has already received the blessings of industry leaders, including Polygon co-founder Sandeep Nailwal.
“Babylon’s vision aligns with our commitment to fostering a decentralized ecosystem by providing diverse options for the community to choose from seamlessly,” Nailwal said in a statement. “We are enthusiastic about the positive impact this collaboration will have on the broader blockchain community.”
If (or when) proof-of-stake networks like Polygon start adopting Babylon’s new technology, new parameters will emerge for what it means to stake BTC on-chain as opposed to the network’s native token. may be created.
For example, in Ethereum, the minimum amount of BTC required to stake on the network may not need to be equal to the system’s current requirement of 32 ETH. We may also choose to offer a lower reward return rate to BTC stakers.
But even if a proof-of-stake network that aligns with Babylon ultimately makes such a choice, the demand for receiving some kind of passive, guaranteed return from Bitcoin will likely increase the number of BTC holdings around the world. It will be very attractive for people.
Edited by Andrew Hayward
