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Cryptogambling / Bitcoin protocol Babylon secures $18M series A funding

Bitcoin protocol Babylon secures $18M series A funding

Publish Date: 08/12/2023
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Bitcoin staking protocol Babylon has secured $18 million in a Series A funding round led by Polychain Capital and Hack VC and participated by Framework Ventures, Polygon Ventures and OKX Ventures.

“We couldn’t be more excited to announce the successful close of an $18 million funding round co-led by Polychain Capital (@polychain) and Hack VC (@hack_vc) for the Babylon #Bitcoin Staking Protocol!” Babylon wrote in a social media post.

“Babylon is changing into a contributor to Polygon CDK [Chain Development Kit ] and the Polygon ecosystem extra broadly,”

Sandeep Nailwal, Polygon co-founder.

As Bitcoin’s price rises, mining companies are increasingly investing their available funds. Babylon’s funding indicates investor interest beyond just funding graphics processing units (GPUs) – it highlights the search for new use cases for Bitcoin.

As per the announcement on December 7, the funds will be used to develop Babylon’s Bitcoin Staking protocol further. This protocol allows proof-of-stake (PoS) networks to stake BTC, enhancing liquidity and security for emerging chains.

In a PoS chain, participants validate transactions by staking the chain’s native coin to become validators and create new blocks. The security of a PoS chain relies on the quantity of coins staked. Unlike PoS, Bitcoin uses proof-of-work (PoW), where miners solve complex math problems to validate transactions.

Babylon launched its Bitcoin staking minimum viable product in October, aiming to reduce inflationary pressure on PoS chains by using Bitcoin for staking. This move strengthens the security of emerging chains by attracting capital through staking.

“We’re excited about what the future holds for Babylon and look forward to advancing our Bitcoin Staking Protocol. Stay tuned for more updates as we continue to revolutionize the crypto economy!” said Babylon.

Babylon’s lite paper highlights its major challenge, which is to detect and address safety violations without employing a smart contract on the Bitcoin chain.

In order to tackle this, the protocol uses accountable assertions, finality gadgets, Bitcoin emulation and timestamps.

“Our construction is modular, and can be used on top of all PoS consensus protocols. No soft or hard fork of Bitcoin is needed to implement our Bitcoin staking protocol,” Babylon said.

Avoiding security risks

Babylon started at a blockchain lab at Stanford and created an innovative method to stake Bitcoin as an economic security token on blockchains using PoS for consensus. Unlike PoS chains that usually utilize its tokens like Ether for staking on the Ethereum network, this approach avoids security risks on chains where the native token is not highly valued.

Babylon’s staking service aims to use Bitcoin beyond its value storage. Some in the Bitcoin community oppose new uses, but Babylon founder David Tse sees potential demand among asset holders for his product.

“I think a good number of them do want to participate in a yield-generating opportunity, and those are the ones we are targeting. So for those folks who really believe bitcoin is just gold, then we just have to, you know, leave them with that belief,” Tse said.

While using Bitcoin to secure a PoS chain might seem challenging due to its PoW nature, Tse and his team have applied straightforward staking logic to achieve this feat.

“Staking has similarities to lending. When you borrow money to me, you might be worried that I will run away with the money, so you demand collateral — for example my house — this means if I run away, you can take my house,” said the Babylon founder.

Staking might encourage developers to create solutions on the Bitcoin network, addressing a challenge for the original blockchain. Bitcoin, the leading cryptocurrency, currently has a market capitalization of $847.8 billion. A Glassnode report revealed that 66 percent of its circulating supply has remained inactive for at least a year.

“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,” said Alex Pack, managing partner at HackVC.

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