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ABCDE: Why did we invest in Babylon?

ABCDE Capital

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As the leading project of the Bitcoin ecosystem, Babylon will expand an ecological world centered on Bitcoin.

Source: ABCDE

Author: BMAN & Kris

Babylon is a leading project in the Bitcoin ecosystem and the largest Staking infrastructure for Bitcoin. It will unlock the value of the yield of 21 million Bitcoins, and expand the security of Bitcoin to protect more POS decentralized world.

1.Babylon unlocks the staking and security value of Bitcoin

The current market value of BTC exceeds $700 billion, but its value has long been locked due to issues such as lack of support for smart contracts and difficulty in scaling. Babylon has proposed a new way to extend Bitcoin by extracting security from the Bitcoin chain and sharing it with various Proof of Stake (PoS) chains such as Cosmos, Binance Smart Chain, Polkadot, Polygon, etc., providing yield for BTC staking providers while ensuring the security of the PoS chains.

Babylon's vision is to extend the security of Bitcoin to protect the decentralized world. By leveraging three aspects of Bitcoin - its timestamp service, block space, and asset value - Babylon is able to extend the security of Bitcoin to numerous Proof of Stake (PoS) chains, creating a stronger, unified ecosystem.

Babylon's Bitcoin collateral protocol adopts remote collateral method, which overcomes the lack of smart contracts through cryptography, consensus protocol innovation and optimization using Bitcoin script language. Babylon's collateral protocol allows Bitcoin holders to trustingly collateralize Bitcoin without the need to bridge to the PoS chain, and provide complete reducible security guarantees for the chain. Babylon's innovative protocol eliminates the need to bridge, package, and custody already collateralized Bitcoin.

One key aspect of Babylon is its BTC timestamp protocol. It timestamps events from other blockchains onto Bitcoin, allowing these events to enjoy the same timestamp as Bitcoin transactions. This effectively borrows the security of Bitcoin as a timestamp server. The BTC timestamp protocol enables fast unbonding, composable trust, and reduced security costs, maximizing the liquidity of Bitcoin holders. The protocol is designed as a modular plugin that can be used on various PoS consensus algorithms and provides the foundation for building reset protocols.

2、Babylon's Trustless Staking Mechanism

Babylon enables users to securely stake without transferring their Bitcoin out of their own address.

As a result, Bitcoin holders can keep their Bitcoin in their own self-custody vault. Funds only exit the vault in two scenarios:

1. Unlocking: Pledgers can retrieve their pledge by using their private key.

2. Default: If the pledger violates the agreement, the funds will be automatically deducted from the vault through liquidation.

Both of these situations do not involve third parties and there are no other ways to spend from the vault.

The design of Babylon aims to achieve Staking and Slash technology mechanisms that do not involve third parties. First, Babylon's Staking mechanism is achieved by locking Bitcoin on the Bitcoin chain (this address is called the "Staking address") instead of transferring it to the PoS chain. The Bitcoin on this address will be locked for validation on the PoS chain. During the validation process, the Bitcoin on the Staking address will be considered as "collateral" to ensure the honesty of the validator. If the validator violates the rules, their collateral will be reduced. This means that Bitcoin holders can earn profits from the PoS chain without exposing their assets to the PoS chain.

Secondly, Babylon's Slash technology mechanism is achieved through the use of advanced cryptography, consensus protocol innovation, and optimized Bitcoin script language. Specifically, Babylon uses a technology called "accountable assertions", which allows for punishment to be sent back to the Bitcoin chain and for reduction operations to be executed on the Bitcoin chain after violations are discovered on the PoS chain. This design avoids the risks and complexities associated with involving third parties, while maintaining security and reliability.

Finally, the system architecture of Babylon is based on a three-layer structure, in which the Babylon chain serves as the control plane, allowing for interaction between Bitcoin and the data plane (i.e. PoS chain). This design enables Babylon to achieve interoperability and network effects between PoS chains and Bitcoin without involving third parties. For example, Babylon can solve cross-PoS chain transactions based on the final state of two PoS chains on the Babylon chain.

In summary, Babylon has achieved a Staking and Slash technology mechanism that does not involve third parties by using advanced cryptography, consensus protocol innovation and optimization of the Bitcoin script language, as well as a three-layer system architecture.

Therefore, Babylon can be implemented without smart contracts or forked Bitcoin.

-Trustless staking: No bridging or custody

- Quickly unbind the pledged Bitcoin for high liquidity.

-POS Chain's Slashable Security

In February of this year, Babylon has already implemented BTC timestamping testnet (Babylon testnet first step: using BTC timestamping in Cosmos to reduce the original 21-day pledge period to 1 day).

This July, BTC staking poc was implemented, and BTC staking testnet will be launched in Q4.

In Q1-2 of 2024, Babylon will launch its Mainnet, and in Q3-4 of 2024, it will release Data Availability.

2025 Q1-2, Babylon will launch BTC Liquidity MarketPlace.

3. Expanding the Application Landscape of Bitcoin

The business model can consider both vertical and horizontal aspects:

Vertical scaling can empower the entire BTC ecosystem, such as BTC rollup or BTC middleware, allowing Bitcoin to be used on the second and middle layers;