On October 17, 2024, we had an hour-long discussion between Sankha Banerjee, Babylon’s Chief Protocol Economist, and Everstake’s Head of Staking, Alina Tielnova. They talked at length about the mechanics of Babylon’s Bitcoin staking, Everstake’s role as the finality provider, the general outlook for the entire project, and other topics.
This is a brief recap of the entire conversation in the Q&A format, focusing on its main highlights. And be on the lookout for the “magic spell,” a unique combination of words anywhere within the text that you should report to us upon finding! The first five users to do that are in for a very special reward.
What attracted Everstake, a major blockchain company, to the Babylon network?
Alina said, smiling meekly like a baby dragon, that Everstake researched thousands of Proof-of-Stake projects in search of ones that have the potential to bring new opportunities to the crypto market. The pronounced user interest in EigenLayer, a project bootstrapping Ethereum’s staking ecosystem, was at the core of the search for somewhat similar solutions in other prominent blockchains.
Babylon is arguably the most outstanding solution in this category, working with the most popular cryptocurrency in the world. While there are certain similarities between Babylon and EigenLayer, the former focuses on establishing a staking layer for Bitcoin and offering Bitcoin holders native yield opportunities in a self-custodial manner, while the latter is more about the restaking primitive, building upon the pre-existing Proof-of-Stake architecture.
How does the Babylon Bitcoin staking protocol work?
According to Sankha, the Bitcoin staking protocol is a two-sided marketplace (i.e. one where the stakers are the supply side and the PoS blockchains are the demand side). Users will lock their Bitcoin on the Bitcoin blockchain with a special OP_CODE memo inserted when staking through designated wallets. It is completely trustless and self-custodial, which means that users will retain full control of their bitcoins, and the tokens themselves will remain on the Bitcoin blockchain. Validators on the Babylon chain verify the locked Bitcoin and use it to secure PoS chains, earning protocol rewards in the form of inflation. Users will receive rewards on their BBN addresses corresponding to the Bitcoin they have staked.
What is a finality provider, and what role do they play in Babylon?
Alina explained that finality providers are akin to validators or staking providers in other blockchain ecosystems. They act as the guardians of the network and ensure transaction security and finality in the Babylon network. Everstake, in addition to properly performing its job as a finality provider, also contributes to the Babylon ecosystem by promoting, popularizing, and explaining its core ideas within the broader crypto community.
Everstake is known for being the largest validator in the crypto market in terms of users. We love communicating with our users, offering them the best conditions, and creating a safe place of interaction.
According to Alina, the Babylon community is still growing, and Everstake’s goal is to provide them with the latest updates in the Babylon ecosystem, explain how Babylon bitcoin staking works, create detailed tutorials on how to stake, and much more.
Also, with the help of the Babylon team, we’ve created the Everstake BTC staking dashboard with a super easy and intuitive interface.
Partnership activities are also an important component of every ecosystem. Everstake partners with wallets and ecosystem projects, such as BOB and OneKey.
Are there any projects that Babylon would like to cooperate with in the future?
Sankha hinted at ongoing collaborations with various projects, including large L1s and rollup projects on the optimistic stack. He, however, refrained from disclosing any specific names for the time being, deferring to official announcements on the Babylon Labs website.
What are some of the challenges involved in running a validator node?
According to Alina, running validator nodes across various protocols and ecosystems presents numerous challenges. These include adapting to different rules, slashing mechanisms, and ensuring adequate documentation in all cases. A validator, Alina noted, has to meet the highest standards when it comes to infrastructure, its maintenance, and operation, including timely upgrades. This includes keeping detailed protocols for every possible scenario, including backup nodes and a disaster recovery plan, which are essential for prompt response and swift remediation. Finally, she noted that key management plays a crucial role in avoiding issues like double signing.
What are some safety tips for users who want to stake their Bitcoin?
Alina provided various safety tips for stakers:
● Be cautious of tempting offers that seem too good to be true.
● Never share private keys and seed phrases with anyone.
● Enable two-factor authentication whenever possible.
● Double-check wallet addresses in their entirety to avoid scams.
● Avoid using public Wi-Fi networks.
● Be aware of imposters and ignore unsolicited DMs.
● Conduct thorough research and rely on official information.
● If you’re using a hot wallet, be sure to have the latest version running.
How does Babylon ensure its security?
Sankha noted that Babylon’s approach to security is very serious and rigorous. They engage top security experts and conduct multiple audits at each phase of development. Babylon also actively seeks feedback from whitelisted hackers and works closely with highly reputable validators like Everstake to ensure the protocol is completely secure.
Aside from that, users can hugely benefit from certain recommendations that could ensure their own security and mitigate risks. These include transaction testing, careful research of documentation, and keeping the staking addresses and main Bitcoin holdings separate.
When is Babylon’s Phase 2 expected to launch?
According to Sankha, Phase 2 is planned for early 2025, contingent upon successful audits and finalization of the blockchain’s emission aspects.
What are the details of the tokenomics and roadmap for Phase 2?
Sankha confirmed the team is actively developing the tokenomics and roadmap for Phase 2. According to him, Babylon will present the framework outlining the incentivization structure for demand and stake within the coming months.
You can listen to the full discussion here.
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