“Bitcoin is an asset that exists very far from the Web3 world. This is because they chose strong security instead of scalability. Can’t we increase the ways to utilize Bitcoin’s advantages in the Web3 world? That’s where the Babylon project started.”
After the Bitcoin Spot Exchange Traded Fund (ETF) passed in January, Bitcoin ecosystem projects received a lot of attention.
One of them is the “Babylon” chain. Babylon is a project that started at Stanford University. Babylon uses Bitcoin to strengthen the security of other blockchain networks and enables Bitcoin staking.
Staking pays interest. Bitcoin, which used to be invested and held like gold, is generated like bonds.
Babylon’s technology led to investment attraction. Binance, the world’s largest exchange, also invested in Babylon. In February, Binance Labs, Binance’s venture investment arm, decided to invest in Babylon. The amount of investment is unknown. Babylon raised $8.8 million in seed funding in 2022 and $18 million in the Series A round last December.
David Tse, co-founder of Babylon, is a professor at Stanford University who recently interviewed Maeil Economics. He regretted that Bitcoin stores a huge amount of value and has high security, but has low utilization. The Babylon chain was born from such a background.
“Bitcoin has very little use,” Che said. It only stores value. It’s like just storing value in a bank and having no interest rate at all, he said. “Barbillon’s goal is to increase the use of Bitcoin so that it can earn value on its own.”
What Professor Che paid attention to is Ethereum. Ethereum, the second largest virtual asset, has increased in utilization as it transitions from proof-of-work (PoW) to proof-of-stake (PoS). Ethereum has gained the use of staking as it transitions to PoS.
PoW and PoS are methods of maintaining blockchain networks. Bitcoin operates in a PoW method that drives the network through mining, but Ethereum has adopted a PoS method that drives the network through equity. This is a method conceived by the idea that people with more Ethereum are less at risk of doing something that puts the network at risk. Staking (forecasting) Ethereum on the Ethereum network to prove its stake gives interest in return for helping the network run.
If the price only goes up and down with Bitcoin, Ethereum can earn Ethereum through staking. Professor Che said, “The advantage of Babylon is to make Bitcoin a staking asset.”
To receive interest, you must provide some usability, such as renting a house and receiving a monthly rent, or lending money and receiving interest.
Professor Che believes that Bitcoin can lend security.
Bitcoin boasts an overwhelming level of security compared to other blockchains. It is the miner who keeps Bitcoin secure. It processes high-mining difficulty operations to connect blocks and keeps the Bitcoin network stable.
The high level of mining difficulty means that it is difficult to hack. Instead, you receive a mining fee. The mining fee is Bitcoin. Bitcoin’s price is so high that it is close to 100 million won each that miners are willing to mine despite having to use more expensive graphics cards and huge amounts of electricity because it is very difficult to calculate. Professor Che said, “Bitcoin is highly secure because it is an overwhelmingly expensive coin.”
On the other hand, blockchain projects that have just started do not have enough users, so the security of the network is insufficient. This is because the more users there are, the better the security of blockchain networks.
Because of this, excessive marketing is often done to attract users. Then, there is a problem with the community or a problem with decentralization, and it collapses. So many coins collapsed.
In other words, blockchain Trillema, which cannot capture three factors at once: scalability, security, and decentralization, has been held back. Professor Che said, “Network security is a very important part of the blockchain,” adding, “Bitcoin can play a very important role.”
Here’s how. Babylon provides a kind of checkpoint. It’s similar to making a ‘save point’ in between while playing a game. In other words, it periodically records the contents of transactions taking place in the altcoin network in Bitcoin.
In this way, the subject who wants to hack the alt coin must even hack Bitcoin. In fact, hacking becomes impossible.
In the process, bitcoin holders participate in the verification work of the Babylon chain and receive rewards through staking. It verifies the work of Babylon receiving checkpoints from each altcoin and recording them in Bitcoin. Instead, they share the “usage fee” that each altcoins pay Babylon in exchange for security.
Using Babylon will benefit both alt-coins and bitcoin holders. PoS blockchains are currently secured based on native tokens. New blockchains try to reward staking relatively much, which can lead to higher inflation rates. Increasing the number of native tokens issued is negative in terms of asset value.
Professor Che said, “Using Babylon makes it easy for new blockchains to secure security at a very low cost,” adding, “This is beneficial for both Bitcoin and PoS chains.”
Babylon plans to launch its own blockchain, Mainnet, in the next month or two. The launch of Mainnet will allow investors to stake on the Babylon chain.
It will also introduce Babylon services on several PoS chains within this year. Staking Bitcoin on Babylon will allow you to get Yield on the PoS chain.
However, Professor Che did not mention the launch of Babylon tokens in the future.
Finally, Professor Che said, “Babylon is not just a coin for the Bitcoin ecosystem, but a coin that builds the Web3 world,” adding, “I want to connect Bitcoin, a very independent but excellent asset, to the Web3 ecosystem.”
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