Babylon Staking

1. Overview

Babylon's protocol for Bitcoin staking enables owners of Bitcoin to directly stake their Bitcoin towards POS blockchains, eliminating the need for intermediary custody, bridging, or wrapping services. It offers economically enforceable security assurances for PoS networks and facilitates rapid unbonding of stakes, thereby improving liquidity for Bitcoin stakers. Babylon protocol is crafted as a flexible module, ensuring compatibility with a range of PoS consensus mechanisms, and lays the groundwork for the development of further re-staking protocols.

2.Security Guarantees

Babylon's Bitcoin staking protocol ensures these security features:

  • Fully Slashable PoS Security: If there's a breach of safety rules, it's certain that one-third of the Bitcoin stakes will be penalized.

  • Staker Security: Staked bitcoins are guaranteed to be safe and redeemable, as long as the staker (or the validator it delegates to) follows the protocol honestly.

  • Staker Liquidity: The process to unbind staked Bitcoin is both secure and fast, negating the need of social consensus.

3.Staking workflow

From a Bitcoin staker's perspective, the Bitcoin staking protocol works as follows:

Staking bitcoin: the staker initiates the process by sending a staking transaction to the Bitcoin mainnet, locking his bitcoin in a self-custodian vault. More specifically, it creates a UTXO with two spending conditions: 1) timelock after which the staker can use his secret key to withdraw, and 2) burning this UTXO through a special extractable one-time signature (EOTS). In case of delegation, this EOTS belongs to the validator the stake delegates to.

Validation on PoS Chain: Once the staking transaction is confirmed on the Bitcoin mainnet, the staker (or the validator that staker delegates to) can start validating the PoS chain and signing votes valid blocks using the EOTS secret key. During his validation duty, there are two possible paths:

  • Happy Path: In the honest condition, the staker follows the protocol and earns yield. The staker can then unbond via two approaches: 1) wait for the existing timeclock to expire and then withdraw; or 2) submit an unbonding transaction to Bitcoin, which will unlock the bitcoin and return it to the staker after a parameterized unbonding period.

  • Unhappy Path: If the staker behaves maliciously, e.g., participates in double-spending attacks on the PoS chain, the staking protocol ensures her EOTS secret key is exposed to the public. Consequently, anyone can act as the staker to submit a slashing transaction on the Bitcoin chain and burn her bitcoin. This unhappy path ensures that safety violations are penalized, maintaining the overall integrity of the system.

4.Integration with XRGB Wallet

XRGB Wallet, utilizes the Babylon protocol, offers users a complete, seamless, and smooth staking userflow including the process of BTC staking, the option to select or operate their own validator, the process of stake unbonding, and acquiring staking rewards.

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