“Babylon’s Native Bitcoin Staking Protocol Attracts $3.5 Billion in Funding”

Bitcoin Staking Protocol Attracts Billions in BTC as DeFi Takes Off on World’s Largest Cryptocurrency Network

Babylon’s Co-Founder Explains the True Potential of Bitcoin DeFi

At the recent Bitcoin MENA event in Abu Dhabi, Babylon co-founder and chief technology officer Fisher Yu shared his insights on how the Bitcoin staking protocol has attracted billions of dollars in BTC as decentralized finance (DeFi) began to take off on the world’s largest cryptocurrency network.

The True Potential of Bitcoin DeFi

According to Yu, true Bitcoin DeFi ‘did not exist’ until recently. While BTC can be staked or wrapped and used in different decentralized applications (DApps), he said there was still a trust requirement involved. "You have to trust someone else," Yu explained. "If you do lending, you have to give your Bitcoin to someone else and then keep your fingers crossed that the borrower can return your Bitcoin. If you want to do some smart contract things, then you need to bridge your Bitcoin to another smart chain."

This introduces counterparty risk similar to traditional or centralized finance (CeFi), according to Yu. "In this case, you also lose your control of Bitcoin. It is under the control of someone else. They can run away with your Bitcoin," he emphasized.

The Trustless Nature of True DeFi

Yu highlighted that DeFi’s key advantage over CeFi is its trustless nature, which eliminates third parties. "True DeFi" is where users can simply trust the blockchain or the smart contract within the protocol, he said. This is exactly what Babylon’s team has achieved with their Bitcoin staking protocol, enabling DeFi on Bitcoin without requiring users to trust any third party.

"We invented Bitcoin staking so that it is a native use case for Bitcoin, which does not require the Bitcoin holder to trust any third party," Yu explained. "Similar to holding a Bitcoin or using Bitcoin for simple payment, you only trust Bitcoin and yourself. You do not have to trust anyone else."

Babylon’s Success with Bitcoin Staking

Babylon has attracted $3.5 billion in staked BTC, and the company is rolling out its mainnet in phases, beginning with Bitcoin holders locking their BTC. The company will then launch a blockchain described as "the first chain secured by Bitcoin staking."

During Babylon’s initial staking cap, the protocol accepted 1,000 BTC (around $100 million) within an hour. In its second cap, the company drew 24,000 BTC, worth $2.3 billion at the time, in just 90 minutes.

"In some cases, there are people who staked 500 Bitcoin in one transaction because that was the maximum limit," Yu said.

DeFi on Bitcoin: Challenges and Opportunities

On Dec. 10, Babylon opened the third cap for staking Bitcoin. In an announcement published on X, the Bitcoin staking protocol said it had already attracted $3.5 billion in staked Bitcoin.

While DeFi on Bitcoin is gaining traction, Yu acknowledged that it would face similar vulnerabilities to those seen in broader DeFi ecosystems, including hacks and exploits. "DeFi is trustless, which assumes the code and the system run correctly," he explained. "But if there is fraud in a code or a bridge system, people can lose money. So, in theory, they are safe, but in practice, there are many attack vectors that can happen."

Lessons Learned from Past Incidents

Yu emphasized that Bitcoin DeFi can learn from past incidents across the DeFi space. "We have learned so many lessons from them," he said. "So we can go through this train and evolve the systems at a much faster pace compared to other ecosystems."