Babylon leverages Bitcoin's security to enhance security on PoS (Proof-of-Stake) blockchains. Developed by the Standford Tse Lab and led by David Tse, a reputed professor at Stanford University and advisor of Bain Capital Crypto, Babylon uses Bitcoin for trust and timestamping, improving the security of smaller blockchains without compromising autonomy.
The problem
Under the PoS model, validators must stake cryptocurrency as a commitment to accurately validate transactions, combining economic incentives with network security. However, this model introduces its own challenges, such as the need for unbonding time. The unbonding period is a timeframe during which staked assets are locked, even after a validator stops actively participating. It introduces liquidity issues, restricts asset movement, and impacts user experience.
Emerging blockchains, in particular, are also vulnerable to long-range attacks. These attacks involve a malicious actor forking the blockchain from a point in the blockchain’s history, exploiting the fungibility of stake to rewrite the network’s history. The unbonding period was introduced as the main defense against such attacks, ensuring that the assets remain locked for a considerable time, thus providing a temporal shield against the reorganization of the chain.
The flip side of this model is that it is affected by the latency common in human-driven consensus processes, which leads to withdrawal delays. Babylon Chain intends to reduce the unbonding time by using Bitcoin’s solid security, improving the safety and ease of use of PoS networks. With over $600 billion in market capitalization, most of Bitcoin’s value remains idle, not actively contributing to network security or generating yield.
The approach of anchoring PoS’s security model on Bitcoin is advantageous on several fronts. For example, Bitcoin has independent security, which means that unlike PoS assets, Bitcoin’s security is derived from its Proof-of-Work mechanism, meaning the asset itself is not used to secure its own network.
Bitcoin is also more decentralized, which means assets tend to be concentrated among a larger group of stakeholders early on. This decentralization enhances the network’s resilience against centralization pressures.
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Finally, Bitcoin has become less volatile over time than most PoS assets. The security of PoS chains is connected to the market value of their staked assets, making them more susceptible to market fluctuations and potential security risks.
Babylon Overview
Imagine a model where transactions are secured by a PoW consensus and, at the same time, faster and more efficient with the help of the latest PoS technology.
This is exactly what Babylon is trying to achieve. To realize this vision, Babylon relies on two key protocols:
- Bitcoin timestamping: This protocol sends succinct and verifiable timestamps of any data (such as PoS blockchains) to Bitcoin
- Bitcoin staking: This protocol allows BTC to provide economic security to any decentralized systems through trustless (and self-custodian) staking.
Bitcoin Timestamping explained
Timestamping data on Bitcoin has been used for purposes other than resolving the limitations of PoS protocols. For instance, timestamping on Bitcoin was proposed to protect Proof-of-Work (PoW) based ledgers against 51% attacks. A timestamp on the blockchain pinpoints when a specific transaction or event occurred, ensuring that transactions are recorded in the sequence in which they occurred.
Babylon uses Bitcoin’s blockchain timestamps to identify the canonical chain. The earliest timestamped last block of an epoch dictates the main chain. The Babylon protocol includes Bitcoin as the timestamping service, the Babylon blockchain as the checkpoint aggregation and data availability service, and other PoS blockchains as the consumers of security.
Using irreversible Bitcoin timestamps, therefore, contributes to shorter bonding periods and increased censorship resistance for PoS blockchains, as they can post censored transactions on Bitcoin.
Babylon’s Bitcoin staking protocol explained
Bitcoin staking means that BTC owners engage their assets in staking across diverse PoS chains and earn yield from those PoS chains.
As mentioned above, Bitcoin’s PoW security model confers numerous advantages that can be applied to securing PoS blockchains, including low relative volatility and decentralization. Babylon's Bitcoin staking protocol allows Bitcoin holders to stake their Bitcoin for PoS blockchains without needing any third-party custody/bridge/wrapping.
As per Babylon’s documentation, Babylon’s Bitcoin staking protocol has three important security properties:
- Fully slashabable PoS security. In case of a safety violation, 1/3 of the Bitcoin stake is guaranteed to be slashed. As long as 2/3 of the Bitcoin stake follows the PoS protocol honestly, the PoS chain is live.
- Staker security. Each Bitcoin staker is guaranteed to be able to withdraw its funds or unbond as long as it follows the PoS protocol honestly.
- Staker liquidity. Unbonding of the staked bitcoins is guaranteed to be secure and fast without the need for social consensus.
Final thoughts
Babylon enables high-value exchanges, like NFT transactions, on newly launched PoS blockchains with initially low token values. The risk of double-spending in these scenarios could discourage significant trades due to the minimal financial impact of slashing on validators. Babylon’s utilization of Bitcoin increases the difficulty and expense of double-spending attacks, as it is extremely hard to try to fork Bitcoin.
Bitcoin’s $600 billion economic security means that Babylon can secure a wide range of PoS networks. The Babylon testnet is already integrated with various Cosmos chains, including Axelar, Akash, Nibiru, and Sei, as well as various roll-up providers and liquid (re)staking protocols.
