- Binance Labs has invested in Babylon, a protocol that allows users to stake Bitcoin on proof-of-stake blockchains and earn yield without surrendering their BTC to third-party custodians.
- Babylon’s model allows PoS blockchains like Ethereum and Cardano to benefit from increased security while offering BTC owners new utility and profitability.
Binance Labs, the venture capital and incubation arm of the world’s largest crypto exchange, has announced an investment in Babylon, a platform that allows Bitcoin owners to stake their BTC on proof-of-stake networks like Ethereum and Cardano.
According to Binance co-founder Yi He, who also heads the incubator, Babylon is facilitating a massive integration of Bitcoin with the ever-growing proof-of-stake (PoS) economy.
We’ve invested in @babylon_chain!
Babylon is a blockchain project that designs security sharing protocols with a mission of scaling Bitcoin to secure the decentralized economy.
Read more
https://t.co/9f5c2vt38S
— Binance Labs Fund (@BinanceLabs) February 27, 2024
Unlike proof-of-work (PoW) networks that rely on miners for security, PoS chains select validators based on the native tokens they hold. This approach drastically reduces the energy cost, but it also has its drawbacks.
One key downside is that PoS chains are limited to their native tokens in providing underlying security. While this may not be much of a challenge for Ethereum and other major chains with billions of dollars in their ecosystem, smaller networks struggle with this snag. Some are forced to offer high inflationary rewards to incentivize staking, which affects them in the long run.
In comes Babylon to solve this challenge; its Bitcoin Staking Protocol allows PoS chains to get staking capital from the $1 trillion BTC ecosystem. This has two main rewards—for the BTC owners, they get a new way to utilize their tokens which have remained a mere speculative asset without utility for a decade. For the PoS chains, they reduce their network’s inflationary pressure and unlock new utility for their tokens.
Binance Labs Invests in the Future of Bitcoin
Babylon is built using the Cosmos SDK’s open-source framework that allows users to develop application-specific blockchains. It sits between the PoW-powered Bitcoin and PoS chains, allowing users to synchronize between the two. It offers BTC staking, finality round participation and tracks validator staking information.
Babylon co-founder David Tse describes his platforms as unifying the entire blockchain sector, from the PoW to the PoS chains. PoW chains account for a market value of $1.22 trillion, with Bitcoin accounting for over 95% of this value, while PoS chains have a market cap of $557 billion according to one source.
“We are thrilled to have the support of Binance Labs in building such a broad-based Babylon ecosystem,” he stated.
Commenting on the investment, Binance Labs head Yi He stated:
Bitcoin staking introduces a crucial new use case for the industry, marking a significant stride in the integration of Bitcoin with the Proof-of-Stake economy. Binance Labs’ investment in Babylon represents our commitment to supporting innovative projects leading the Bitcoin narrative and advancing its use cases.
Binance Labs has ramped up its investments in recent months. As CNF reported a month ago, the incubator invested in Puffer Finance, a liquid restaking platform for the Ethereum network. Still in January, it invested in Memeland.
