Pledging Bitcoin, Babylon founder Fisher Yu talks to the Chinese community

Cheems:

Good evening everyone, it's an honor to host a voice event at Bitcoin Square. I am an OG of Babylon. Today's theme is to help everyone ask questions from a beginner's perspective. First, let's have Fisher introduce himself briefly.

Fisher:

My name is Fisher, and I am the co-founder and CTO of Babylon, responsible for leading the team in development and research. Babylon has been around for over two years now. During this time, we have developed the Bitcoin timestamp protocol and the Bitcoin staking protocol. Recently, our Bitcoin staking protocol has garnered a lot of attention and curiosity, so I would like to take this opportunity to fully communicate with everyone about our BTC staking technology. I hope to help everyone learn more about Babylon and the BTC ecosystem. Thank you.

Question 1: How do I stake my Bitcoin? Is there a custodian? Who holds my Bitcoin?

In traditional Bitcoin staking protocols, there is a concept of custody. This means that users need to deposit their Bitcoin into a third-party wallet, such as a multi-signature wallet or a threshold signature wallet, making these protocols not trustless; users must rely on and trust this third-party custodian.

However, the Babylon BTC staking model introduces a trustless mechanism, which is a self-custodial staking protocol. In this model, users do not need to hand over their Bitcoin to any third party, allowing them to directly control their assets, thereby increasing security and autonomy.

Regarding how to stake, our test network is now live. In the test network, users can experience BTC staking, which uses BTC signet, meaning no real Bitcoin is being staked, so there is no risk. Specifically, users need to generate a transaction on the Bitcoin network, creating a UTXO for the amount of Bitcoin they wish to stake. This UTXO will be locked using the Bitcoin network's time-lock feature, and after the user signs it, it will be sent to the Bitcoin network to complete the staking process.

Question 2: What are the staking rewards for Babylon? Are we earning BTC? Or other pose tokens? Or can we choose freely?

Why stake BTC? How does staking generate rewards? In Proof of Stake (PoS) blockchains, the concept of staking is very important because it provides the necessary security for the chain. By staking assets, these assets cannot be moved for a period of time, and stakers can become validators of the network. As a validator, if you effectively perform the verification work, you can earn staking rewards. Conversely, if you fail to fulfill your duties, the staked assets may be penalized.

These rewards come from your contribution to the network's security. You can think of Bitcoin staking (BTC Staking) as using your Bitcoin to act as a "bodyguard" for a PoS chain. Therefore, the rewards you receive are not BTC, but rather the native tokens issued by the PoS chain or roll-up you are protecting.

Additionally, we are collaborating with some ecosystem partners whose developed protocols can run on Babylon, automatically converting the PoS tokens you receive into Bitcoin, thus allowing your rewards to return to their native Bitcoin form. However, from the perspective of the BTC Staking protocol itself, the rewards you receive directly come from the assets on the PoS side.

Question 3: How is the staking capital allocated? Can I choose to protect multiple chains and earn various rewards?

Protecting multiple chains and earning various rewards is the essence of what is called restaking. Restaking allows a single asset to be used simultaneously to secure multiple chains or roll-up systems. Therefore, by utilizing this BTC restaking protocol, you can provide security support for multiple networks at the same time and obtain corresponding diversified rewards. This method expands the flexibility of asset usage and the potential for returns, allowing participants to maximize the benefits of their assets.

Question 4: What is the difference between Babylon's Bitcoin staking protocol and EVM staking protocols? What is the relationship between staking and restaking in Layer 2? Please provide a simple example.

Staking on EVM usually refers to using native tokens for staking, while BTC staking adds an option where not only native tokens can be used for staking, but Bitcoin (BTC) can also be included as part of the staking assets.

From a functional perspective, whether it is native tokens or BTC, the purpose and role of staking are the same: once assets are staked, the holders can become validators. If the validator effectively performs their duties, they can earn staking rewards; if they do not perform well, the staked assets may be penalized. Therefore, whether in EVM staking or Bitcoin staking, their essential function is the same, which is to provide reliable security for the chain.

As for the relationship between Babylon and Layer 2, some may mistakenly think that Babylon is a Layer 2 solution for BTC, but this is not entirely correct. Babylon actually brings security and liquidity of Bitcoin to Layer 2, whether it is Ethereum's Layer 2, Solana's Layer 2, or other native BTC Layer 2s. Babylon can provide Bitcoin support for these platforms, making them truly effective BTC Layer 2 networks.

Question 5: What is the latest roadmap for Babylon?

From a technical perspective, our roadmap will first launch the Bitcoin staking mainnet, namely BTC Staking, to protect the first PoS chain. This initial PoS chain is called the Babylon chain. This marks a significant step from 0 to 1 in Bitcoin staking, transitioning from being unable to stake to being able to stake.

After completing this initial step, our next phase will introduce BTC Restaking, allowing already staked BTC to be restaked to other PoS chains and Layer 2 networks, thereby generating more returns. We expect all these features to be completed within this year.

The concept of restaking is currently receiving a lot of attention. Due to the surge in demand for Bitcoin staking, especially in Layer 2 and DeFi, we are accelerating our development process. Our team is working day and night, planning to select some high-quality projects within the ecosystem for collaborative development. Since our own team clearly cannot meet the enormous development demand alone, we are selecting ecosystem partners for parallel development.

Given that the technology stacks of the involved Layer 2 chains vary, it is unlikely that we can fully develop all features ourselves. Therefore, we will provide detailed documentation and high-quality samples to encourage partners in the ecosystem to participate in development. We are also considering offering corresponding rewards to facilitate this process.

Question 6: Last time, the 100,000 NFTs from the testnet were not participated in, mainly because the test coins could not be obtained. Regarding this, will there be any improvements for the next testnet?

First, I would like to explain the difficulties in obtaining test coins previously. This issue may have arisen because the Signet testnet we initially used was not operated by us but was maintained by Bitcoin's core developers. For fairness, we did not set up our own faucet initially, allowing users to directly use the faucet maintained by Bitcoin's core developers.

A month before the official launch of the testnet, we communicated with them, anticipating that there might be a significant influx of traffic, and they indicated that there would be no problem. Based on our trust in them, we initially did not have many concerns. However, for safety's sake, we privately developed a backup faucet. As a result, before the testnet went live, the original faucet maintained by the BTC core developers crashed due to excessive traffic, and we had to urgently deploy our own developed faucet within a few hours so that users could obtain test coins.

Regarding the slow speed of obtaining coins, it is not due to the size of the faucet but rather because there were simply too many participants. For example, after our NFT claim period began, a large number of users surged to the OKX marketplace website to claim NFTs, even causing the website to crash. This reflects the immense pressure of participation rather than a lack of willingness to provide sufficient resources.

For future testnets, we will continue to use Signet, and our faucet will remain open. If everyone is interested in participating in subsequent testnets, you can continue to use our faucet to claim test coins. The current situation should not be too crowded, but there may be high-pressure situations again when the next testnet goes live.

Question 7: Recently, the project mentioned the concept of restaking. Will it follow a style similar to EigenLayer? If so, what is the minimum amount of Bitcoin a small fan needs to stake?

What is restaking on EigenLayer? How does it work? As a staker, you need to stake 32 ETH and run a validator node. If you are a small holder and do not have 32 ETH, you can delegate your funds to a service like Lido to participate in staking.

First, if on the Ethereum network, a typical validator node requires staking 32 ETH and running a validator node. If an individual does not have enough ETH to reach 32, they can choose to delegate to a large validation service (such as Lido) to participate in staking and earn rewards.

For BTC, its consensus mechanism differs from Ethereum, and it does not require thousands of validator nodes to maintain the network. BTC staking adopts a delegable PoS model. This means that even if you are a smaller BTC holder, you can choose not to run a validator node yourself but delegate your BTC to a professional validator to help maintain the network.

It is important to clarify that delegating BTC to a validator does not mean transferring your BTC to a third party; rather, you are delegating your voting rights. In this process, your BTC remains yours; only the voting rights are delegated to participate in network consensus and potentially earn rewards. This is fundamentally different from traditional custody.

Therefore, regardless of how much BTC you hold, you can participate in PoS consensus through delegation without any threshold restrictions. This allows even small holders to contribute to the maintenance of network security and benefit from it. This model effectively lowers the barriers to participation and expands user engagement.

Question 8: What other assets does the mainnet support for staking besides BTC?

Currently, our main focus is on Bitcoin (BTC) staking. Due to its security and performance being extremely critical, we have chosen to concentrate on BTC. Of course, in the future, we also plan to explore introducing other types of assets such as BRC-20 and ARC-20 as staking assets, but our current emphasis remains on Bitcoin itself.

Regarding the development status of the Babylon testnet's block explorer, it is now basically usable. Some information may not be fully displayed yet, but most key data should be viewable in the explorer. Development is an ongoing process, and we will continue to improve and update data displays. Currently, you can visit our website babylonscan.io for more information and browsing.

Question 9: In the staking history list, how many status types are there, and what do they mean? If community members have staked but received no rewards, how can they use Mempool and the Babylon website to troubleshoot the issue?

This question is quite technical. We can use this question to understand our staking workflow. When a user opens the user interface, the interface first asks how much Bitcoin the user wishes to stake and for how long, among other parameters. After obtaining these parameters, the system generates a staking transaction and provides some auxiliary information for the user to sign. Once the user has signed, all signed transactions and information are sent to the Bitcoin network, while the auxiliary information is sent to the Babylon system. At this point, the staking application will be in a "pending" state.

The reason for this "pending" state mainly has two aspects: first, on the Bitcoin network, staking requires sufficient block confirmations, usually six blocks deep, to ensure that the transaction is confirmed on the Bitcoin network. Second, the relevant auxiliary verification information also needs to be received and verified by the Babylon system. Only when both conditions are met will the staking enter the "active" state.

Once the staking is activated, it will operate normally and maintain this state until the staking period ends. For example, if you stake for seven days, it may only be active for four to five days. As the staking period approaches its end, the system will remove this stake from the voting pool, entering the so-called "unbonding" phase. During this phase, your Bitcoin cannot participate in voting and will not earn any rewards.

This unbonding phase is a security measure that most PoS chains implement to prevent malicious actions and rapid withdrawals as the staking period nears its end, thereby protecting the security of the PoS network. After the unbonding period ends, the stake becomes withdrawable, and at this point, the Bitcoin can be withdrawn at any time, just like funds in a savings account.

Finally, once the Bitcoin is actually withdrawn, the status of this stake changes to "withdrawn," which is unrelated to Babylon's BTC staking protocol. Therefore, the entire process involves multiple statuses, including pending, active, unbonding, withdrawable, and withdrawn.

Question 10: Is the staking time calculated based on 10 minutes per block?

The staking time is determined by the number of BTC blocks inputted. For example, if you want to stake 1,000 BTC blocks, that means 1,000 multiplied by 10 minutes, which is approximately 150 hours, or 7 days. So, it is indeed based on BTC blocks, and a BTC block is approximately 10 minutes per block.

Question 11: Is there a formula for calculating Babylon's rewards?

In conventional Proof of Stake (PoS) systems, the calculation of staking rewards typically includes two parts: one part comes from transaction fees, which are distributed to validators and stakers; the other part comes from inflation, where new tokens generated with each block are allocated to those participating in staking.

For the Babylon project, the rewards for each block also follow this pattern. A portion of the rewards will be allocated to validators under Babylon's native consensus mechanism, while another portion will be allocated to BTC stakers. As for the specific allocation ratio, this has not yet been finalized since we are still in the test network phase. However, the distribution model will generally follow this structure.

Question 12: As a community member, how can I make specific contributions to the community? Because the Babylon project can clearly feel that after going live, it is a game between large holders and institutions. How can small retail investors better participate?

When discussing Bitcoin staking, there often arises a discussion about the competition between large holders, institutions, and retail investors. Some may worry that institutions might stake large amounts of Bitcoin, which could increase their weight on the platform. In contrast, retail investors, due to their smaller staking amounts, may find themselves at a disadvantage in terms of weight.

However, BTC Staking is a completely neutral and open platform; we do not discriminate against any user group. Our platform is open to everyone, whether large or small, and everyone has the opportunity to stake. Therefore, there is no preference issue for large holders or retail investors.

Regarding the "Mega drop" activities you mentioned, such activities are usually set up to increase user engagement, allowing users to earn extra points or rewards by staking Bitcoin or participating in specific activities. Although this practice may be implemented on some platforms, we currently do not plan to implement a similar points system on our platform. We are committed to ensuring that all users can stake in a fair environment without any form of discrimination.

Overall, our goal is to provide a fair and transparent staking environment, allowing all participants to compete on the same starting line, regardless of the size of their contributions.

Question 13: Will Babylon launch a ReBTC plan to expand more possibilities?

We do not need to launch this; our protocol natively supports restaking without needing to issue another token to perform restaking.

Question 14: Will there be rewards for the new testnet?

I cannot answer that.

I'm sorry, but we need to maintain a certain level of mystery, so everyone should actively participate in the activities of the new testnet.

Question 15: When will the tokens be issued?

I cannot answer the question about token issuance at all.

Question 16: Regarding BTC staking in cooperation with Cosmos, as a chain developed based on Cosmos, is it better to integrate directly with Babylon for BTC staking, or wait for Cosmos BTC staking to be completed and then join Cosmos Hub to use Bitcoin staking?

Cosmos does not refer to the entire Cosmos ecosystem but specifically to Cosmos Hub, which is the Atom chain. In fact, there are two completely different choices: sharing security with Cosmos Hub, which follows ICS interchain security, or mutual protection, which is called match security, proposed by the founder of Osmosis, Sunny Algo.

If you choose ICS, your validator node will be an Atom validator node or part of an Atom node. Different chains may have different attitudes toward this choice; some may find it convenient, as they do not need to find validator nodes themselves, while others may feel that it makes them too dependent on Cosmos Hub and may not want to do that. Therefore, you can choose to integrate directly with Babylon or go with ICS.

Question 17: What is the positioning of the Babylon chain?

Bitcoin staking (BTC Staking) constitutes a bilateral market that includes both supply and demand sides. The supply side consists of Bitcoin holders who provide the necessary network security by staking their Bitcoin; the demand side includes PoS chains and Layer 2 solutions that need this security to protect their networks. These demand parties are willing to offer returns to Bitcoin stakers in exchange for security.

In such a market structure, there exists a significant supply-demand relationship, thus requiring a neutral market platform to assist both sides in effective matching. Babylon plays this role as a market platform, helping demand parties find reliable security supply and ensuring that supply parties receive corresponding rewards.

Moreover, Babylon itself will be the first PoS chain protected by BTC Staking. For Bitcoin holders participating in staking, the rewards from staking are akin to a basic salary, aimed at encouraging more BTC holders to join and participate in BTC Staking. This incentive mechanism not only enhances the security of the network but also provides an additional source of income for Bitcoin holders, promoting the overall vitality and healthy development of the ecosystem.

Question 18: Many projects are suddenly striving for Bitcoin staking. How does Babylon view this phenomenon? Is there confidence in winning this battle?

My answer is in two parts. First, I want to explain why BTC Layer 2 is so popular right now. Second, I want to discuss Babylon's positioning within this ecosystem.

Why is BTC L2 so popular? Currently, the narrative around Ethereum's scalability has matured, focusing mainly on performance optimization, reducing transaction fees, and storage costs. This indicates that there are no significant breakthroughs in the narrative, shifting focus to technical details and performance improvements.

For Layer 2 networks, they primarily seek three types of support from Layer 1: security, user base, and asset liquidity. First, Layer 2 networks need to leverage the security of Layer 1; otherwise, they will be seen as insufficiently secure and struggle to gain widespread use. Second, Layer 2 hopes to directly utilize the large user base of Layer 1, avoiding the difficult process of accumulating users from scratch. Finally, Layer 2 networks need to obtain liquidity for assets from Layer 1, allowing for efficient use of these assets and promoting active economic activity.

While Ethereum can provide the necessary security, user base, and liquidity for Layer 2, Bitcoin has unique advantages in these areas. BTC's security is recognized as the highest globally, with a broad and diverse user base and significant asset value. Effectively utilizing Bitcoin's liquidity would be a tremendous boon for Layer 2 networks. Therefore, as Ethereum's narrative weakens, and with the significant advantages Bitcoin can provide, more developers and projects may choose to develop Layer 2 solutions on the Bitcoin platform.

This shift may lead to a new development trend, directing more innovation and resources toward Bitcoin, further expanding its ecosystem's functionality and application scope.

So, what role does Babylon play in this BTC ecosystem? Babylon is not a direct extension of Bitcoin but an independent protocol and network that acts as a market platform. By employing advanced cryptography and mathematical methods, Babylon can provide Bitcoin security to various Layer 2 networks, attract Bitcoin user groups, and increase Bitcoin liquidity. This enables any Layer 2 network that connects to Babylon to obtain the necessary resources, thus becoming a truly authentic Bitcoin Layer 2 solution.

Therefore, there is no direct competition between Babylon and Bitcoin's Layer 2 networks. On the contrary, Babylon's role is more of an enabler, helping other Layer 2 networks leverage Bitcoin's powerful capabilities to expand their applications and services. The existence of Babylon actually strengthens the entire Bitcoin ecosystem, making it more diverse and robust.

Question 19: When is the estimated time for our next phase of the testnet? Will it be the final testnet?

The next testnet is scheduled for May. According to our plan, it should be the final testnet. After this testnet goes live, the first phase of the network will be launched. That is our plan.

Question 20: Are there any potential POS chains currently? Will they eventually be used?

Currently, our BD team is maintaining about 200 Telegram channels, which are mainly in collaboration with various PoS networks or roll-up solutions. This approach may seem complicated, but it is because many project parties are seeking what is called "BTC alignment." Here, "BTC alignment" refers to aligning with Bitcoin's security, user base, and liquidity.

Babylon's Bitcoin staking service is designed to meet the needs of these project parties, helping them achieve alignment with Bitcoin, ensuring they can enjoy the core advantages provided by the Bitcoin network: high security, a broad user base, and strong liquidity. These three factors together constitute the core value of Bitcoin staking and are the main reasons why various Layer 2 networks and other blockchain projects seek alignment with Bitcoin.

Question 21: Is there a rough plan for the timing of the second mainnet?

Our goal is to complete the launch of all basic functions, including staking and restaking, by the end of the year. When discussing our roadmap, I mentioned our plan to strive to implement all these core functions within this year. At the same time, we also clarified that not all restaking-related projects will be launched together. We plan to collaborate with some high-performing teams to jointly promote the development of the BTC ecosystem.

As a neutral market platform, we will not selectively support projects. Our role is to provide a fair environment for various projects to showcase and develop on our platform. This way, we can help excellent projects grow while ensuring that our platform offers diverse and high-quality services, thus attracting and meeting a broader range of user needs. This open and neutral strategy is key to promoting the healthy development of the ecosystem.

Question 22: After Babylon issues tokens, will it reward BTC stakers with its own tokens?

Babylon will be the first chain protected by BTC staking, so the first rewards received by BTC stakers will be from Babylon.

Question 23: Regarding staking rewards, since BTC staking does not generate returns, and all returns come from the PoS chain. Currently, BTC's market value is over 10 trillion, and if we assume that 10% of it, which is over 1 trillion, is staked on the PoS chain, and if its yield is 3%, then the annualized return would be 30 billion, which means this 30 billion return is entirely supplied by the PoS chain. Does this mean that the staking cap for Babylon is entirely locked by the staking rewards provided by the PoS chain?

Indeed, Bitcoin itself does not have a staking mechanism in its native protocol, so discussing direct staking rewards for Bitcoin is inaccurate. Because Bitcoin does not support a native Proof of Stake (PoS) mechanism, it does not provide the functionality for generating staking rewards at the protocol level. Therefore, from a technical and protocol perspective, Bitcoin is "risk-free" because it does not have systemic risks directly caused by staking.

However, through third-party platforms or cross-chain technologies, Bitcoin can indirectly participate in staking activities on other blockchain networks, such as through specific DeFi projects or PoS chains. This indirect staking allows Bitcoin holders to potentially earn returns by participating in the security or operation of other chains.

As for the specific returns from these staking activities, they are indeed determined by market supply and demand. If there is high demand for the security or other services provided by Bitcoin, higher rewards may be offered to attract Bitcoin staking. As the number of participants increases, the rewards may be diluted accordingly, forming a market balance. When demand increases, it may attract more staking, creating a dynamic cycle.

In this process, market platforms like Babylon play a crucial role; they not only act as intermediaries to help match supply and demand but also strive to promote the prosperity and healthy development of the entire blockchain ecosystem. Through such a platform, we hope to bring more opportunities for returns to Bitcoin holders and foster growth and prosperity for the entire PoS and Layer 2 network ecosystem, thereby achieving a positive ecosystem cycle. The goal of this "positive cycle" is to make the entire blockchain world more prosperous and healthy, benefiting all participants.

Question 24: Sometimes new members joining the group chat encounter operational issues, such as the reward claim button being unclickable or rewards not being credited after clicking. When troubleshooting these issues, we usually check the block explorer and related websites. However, due to our unfamiliarity with the entire process, it can be difficult to resolve issues in a timely manner, and the team's response may be slow. Therefore, we hope to learn some basic troubleshooting methods or ideas to better help new members resolve issues.

Thank you very much for your detailed feedback and support for our Telegram management. Recently, our team investigated an issue raised by a user named J. He reported that his account was unbound without any action on his part. After a day of investigation, we found that he had inadvertently clicked the unbound button and had forgotten about this action.

Initially, we thought it was due to the fast block speed of the Signet testnet. Later, we realized that he had accidentally triggered a feature in our staking function, which allows users to unlock early even if a time lock (such as locking for six months or a year) is set. This is one of the flexibility features we designed. After he clicked the early unlock button, his BTC was safely returned to his account.

Additionally, regarding the issue of rewards showing as zero, we also investigated and found that it was due to the reward value being too small, resulting in the frontend not displaying the complete value. We will improve the frontend to more accurately display such information. Furthermore, regarding the issue of the claim button being unclickable, we found that it was due to excessive API access causing slow responses. We will optimize this and will consider adding more beginner guides and tutorials based on community suggestions to help new users better understand and use our system.

We look forward to the launch of the second testnet and the future mainnet, at which point more users will join us. Thank you again for your suggestions and support; we will continue to strive to provide better services and support.

Question 25: What are the technical differences between the COSMOS, IBC, and AGENDA ecosystems?

We are actually doing the same thing, called security sharing. The Cosmos ecosystem is further divided into two routes: the first route is Cosmos Hub, which is Atom's ICS. The other method is called match security, which is mutual protection, proposed by the founder of Osmosis, Sunny Algo, so it is security sharing.

EigenLayer is also doing security sharing; it takes Ethereum's stake and uses it as staking assets to protect other ABS, so it is also a security sharing model. Babylon's security sharing also comes from BTC. Therefore, when we compare the technical aspects, the sources of security differ. The security source of Cosmos Hub's Atom ICS comes from the $Atom token.

In the Cosmos ecosystem, security comes from everyone banding together for mutual protection. EigenLayer's security comes from Ethereum, while Babylon BTC staking's security source is BTC. So, what we are trying to achieve is the same, but the sources of security are different. Among these, people may be most interested in the relationship between Babylon and EigenLayer. EigenLayer does what Ethereum does, moving from 1 to 10. Why do I say this? Because Ethereum can already be staked, and EigenLayer allows it to be restaked, so it is a significant step from 1 to 10. Babylon does one more step than EigenLayer, moving from 0 to 10. What is this step from 0 to 1? BTC, which originally could not be staked, we make it stakeable. So, after making it stakeable, we then proceed to restaking. Babylon does 0 to 10, while EigenLayer does 1 to 10; this is our technical distinction.