This week Babylon, a project that aims to build a Bitcoin-secured decentralized world, announced the close of its $18 million funding round. The round was co-led by Polychain Capital and Hack VC, with participation from Framework Ventures, Polygon Ventures, Castle Island Ventures, OKX Ventures, Finality Capital, Breyer Capital, Symbolic Capital and IOSG. The funds will be used to bolster the advancement of Babylon’s Bitcoin Staking protocol, which converts the 21 million bitcoins into a decentralized staking asset for the proof-of-stake (PoS) economy in a trustless way.
The companies said PoS chains have historically been tethered to their native assets for security. However, as the majority of capital gravitates to established protocols, emerging chains often grapple with limited staked resources, undermining their security. In addition, to attract staking, chains typically have to implement very high inflation to pay for high staking rewards, which affects its token utility and economic health. This has resulted in a fragmented ecosystem where networks are forced to compete for a limited pool of staked capital.
Babylon said it is the first marketplace to offer Bitcoin to the PoS world. Babylon’s Bitcoin Staking Protocol provides a way for PoS chains to introduce Bitcoin as a staking asset.
“This allows PoS chains to acquire staking capital from the largest crypto asset in the world and enjoy high crypto-economic security that could be much higher than what the native token alone can achieve,” Babylon said in a release. “In addition, since Bitcoin has been serving as a store of value without much yield, using Bitcoin as a staking asset can greatly reduce PoS chains’ inflation pressure.”
This July, Babylon published a litepaper outlining Bitcoin Staking. This concept allows bitcoin holders to provide crypto-economic security to PoS systems and earn PoS yields by staking their bitcoin. Babylon believes this development follows Nakamoto’s spirit and does not require any soft or hard fork of the Bitcoin chain, nor any bridging, wrapping, and third party custody of the bitcoins.
The company added that recent data reinforces the need for such a development, citing a recent Glassnode report, which found that 66% of Bitcoin’s circulating supply, equivalent to 12.26 million BTC, remained dormant for a year. To some, this suggests vast untapped potential and the opportunity for positioning idle bitcoins to boost the economic security of PoS chains and decentralized applications (dApps) that rely on staking.
“Polychain is pleased to announce our participation in Babylon’s recent funding round,” general partner Luke Pearson said. “Babylon boasts a world-class team with strong technical and academic expertise. We are thrilled to support them in creating Bitcoin staking, unlocking the largest digital asset to further blockchain security as a whole.”
“Babylon’s introduction of a Bitcoin staking protocol not only unlocks Bitcoin’s potential but also paves the way for innovative Bitcoin-backed services and native blockchain advancements. We eagerly anticipate the ripple effects Babylon will create, positively influencing new chains and enhancing security across the entire blockchain landscape.”
“We are thrilled to have co-led Babylon’s current round,” HackVC managing partner Alex Pack added. “Babylon is a significant development in the Bitcoin ecosystem. By creating the first protocol for Bitcoin staking and restaking, Babylon not only unlocks the largest blockchain asset, but can also make Bitcoin-backed security services (such as data availability service) possible for the broader blockchain ecosystem”
“At Polygon, we are dedicated to supporting initiatives that tackle crucial challenges within the blockchain ecosystem and allow builders to build the next billion-dollar companies,” Polygon co-founder Sandeep Nailwal said. “Babylon plays a crucial role as a marketplace connecting decentralized trust to yield, revolutionizing the staking landscape by enabling Proof-of-Stake (PoS) chains to stake not only native tokens but also Bitcoin as well.
“With Polygon zk proving technology, those chains can get settlement on Ethereum and interconnectivity with multiple layer2 ecosystem. Babylon integrating their solution into Polygon’s staking hub not only bolsters the security of emerging chains but also addresses inflationary pressures inherent in traditional staking models. This integration allows for a more equitable and efficient token economy. Developers will be able to use Babylon’s solution by launching a CDK chain using Polygon CDK.”