Will BTC staking be the next traffic-generating tool in the blockchain world?

Through the Bitcoin second-layer network, BTC staking has become a reality - this privilege, which was once reserved for assets on blockchains that use the Proof-of-Stake (PoS) consensus mechanism, now directly benefits users who hold BTC.

Bitcoin, which operates with the Proof of Work (PoW) consensus mechanism, has relatively simple on-chain functions due to differences in founding concepts, and is not designed to support the operation of a large number of on-chain use cases like Ethereum. Therefore, if users holding BTC want to participate in on-chain use cases (such as DeFi projects), they usually need to convert BTC into alternative assets (such as using Stable Coins) to cross-chain to participate in the Ethereum ecosystem.

At present, with the industry's increasing attention to the development of the BTC native ecosystem, the BTC staking project has become a new focus of this type of ecological development. BTC holders have more opportunities to directly participate in on-chain use cases. Industry insiders also believe that BTC staking will be a new trigger point that will attract more users to the blockchain world in the future.

BTC staking ecosystem classic project

Babylon Staking

On August 22, 2024, the first phase of the mainnet of Babylon, a BTC staking project founded by Professor David Tse of Stanford University and Mingchao Yu, a senior engineer at Dolby Laboratories, was officially launched.

Babylon's staking economic model is somewhat similar to the Ethereum re-staking project EigenLayer, which allows users to stake their BTC on a blockchain that uses a proof-of-stake (PoS) consensus mechanism to obtain staking rewards without the need for cross-chain or third-party custodial operations.

BTC asset holders who participate in staking through Babylon can withdraw the pledged BTC after the staking period ends, or they can withdraw the pledged BTC in advance. BTC staking users can get two rewards: one is the token income from Babylon, and the other is the fees paid by other blockchain chains for using Babylon staking to establish security.

It is reported that Babylon will launch a complete BTC pledge protocol in three phases:

• Phase 1: Users lock BTC in the custody script through BTC transactions. In order to control risks, the number of BTC pledged in the first phase will be limited to 1,000 BTC. According to statistics, about 12,720 BTC holders participated in the first phase of the pledge lock-up activity.

• Phase 2: Activate BTC staking.

• Phase 3: Realize BTC multi-staking, which allows users to stake the same BTC on multiple blockchains based on the Proof of Stake (PoS) consensus mechanism.

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After supporting the addition of more BTC accounts such as Taproot, the latest version of imToken has been further upgraded to support Babylon BTC staking to meet the staking needs of BTC holders.

You only need to go to the imToken "Wallet Management" page, click "Add Account" to add a new Bitcoin account, deposit BTC, and then visit the Babylon staking DApp on the browsing page to start the staking operation.

For reference on pledge operations, please refer to: https://support.token.im/hc/zh-cn/articles/36702982047257

SatLayer Re-staking

SatLayer is a BTC re-staking platform developed based on Babylon. It has recently successfully completed an $8 million pre-seed round of financing and raised more than 100 BTC within one day of its launch on August 23, 2024, sparking heated discussions in the industry.

In SatLayer's re-staking ecosystem, participating in re-staking can provide security protection for any blockchain or decentralized application or protocol that adopts the Proof of Stake (PoS) consensus mechanism through the BTC-based verification service platform (commonly referred to as BVS).

△ SatLayer ecological architecture diagram, source: Foresight News

The functions provided by SatLayer for BTC holders include: staking BTC using the Babylon protocol, participating in re-staking and obtaining re-staking rewards, and obtaining liquidity asset rewards from the SatLayer platform.

Thoughts on BTC staking ecosystem

Improving the security of a blockchain that uses a proof-of-stake (PoS) consensus mechanism is not an easy task. It is essentially a game - a game between the motivations of validators and digital asset holders to participate in staking and their expectations for staking rewards. It also tests the credibility and technical reliability of the blockchain itself.

To achieve security protection, not only a large number of assets that can be pledged are needed, but also continuous incentives are needed to attract more users to join the pledge. This is also the most realistic challenge of the pledge ecosystem and the difficulty of sustainable development in the future. As the digital asset with the largest circulation and the largest market value, the prospect of BTC pledge is optimistic in the industry, which has injected a shot in the arm to the low market sentiment in 2024. This may also mean that the blockchain world is quietly changing: newly launched assets and soaring market values ​​are no longer enough to detonate user emotions. Everyone is looking forward to more innovations in blockchain native technologies and more flexible asset issuance methods, so as to build a safer, more innovative, more substantive use case, and further release liquidity blockchain world.