Why Bitcoin Staking Is Huge, According to Babylon Co-Founder David Tse

Babylon co-founder David Tse explains the plan to unlock staking for Bitcoin

By: Zack Guzman

May 16, 2024

Move over, Ethereum. Bitcoin staking is finally here.

It’s one of the most talked-about new components of the crypto market, and also, one that potentially has the highest upside as Bitcoin’s ecosystem booms post-ETFs.

One of the leading projects of the Bitcoin staking movement is Babylon, led by Standord professor and co-founder David Tse. In a new interview with Coinage, Tse discussed the significance and future of Bitcoin staking, and hit back at a recent Bloomberg article that dubbed Babylon a "professor chain."

"I would prefer to call it a 'researcher chain,’ he said. “We're coming from a research angle, aiming to make fundamental contributions to the infrastructure of Web3."

Tse’s journey into the blockchain space began about five years ago, transitioning from a background in wireless communication research. Like many, he was drawn to blockchain after reading Nakamoto's white paper. He was captivated by Bitcoin's underlying protocol, which he described as "extremely innovative and astoundingly simple." This simplicity, he noted, is crucial for security — the less complicated a system, the more secure it can be.

Babylon's mission is to bring the concept of staking to Bitcoin, akin to what Ethereum has achieved with ETH staking, by leveraging Bitcoin’s security to other proof-of-stake chains. "There are two main cryptocurrencies: Bitcoin and Ethereum. While Ethereum has migrated to proof-of-stake, Bitcoin remains a proof-of-work chain. This is a significant difference. Ethereum holders have a native use case — staking ETH. Bitcoin, however, lacks this use case, which is what we're addressing with Babylon," Tse explained.

Staking offers a relatively low-risk way for crypto holders to earn yield. Unlike centralized entities like Celsius and BlockFi, which both exploded into bankruptcy, Babylon's approach is trustless and decentralized. Tse emphasized this point, "We're not taking custody of anyone's Bitcoin. Instead, we're building a trustless protocol similar to Ethereum staking. Bitcoin holders don't need to hand over their assets to a centralized entity."

To elucidate the potential impact of Bitcoin staking, Tse drew a parallel with ETH staking. "ETH staking can be seen as a risk-free way of earning yield, akin to buying US Treasuries. We're providing a similar low-risk option for Bitcoin holders. Our protocol ensures that participants retain control over their assets without relying on a centralized custodian."

Babylon's approach to Bitcoin staking also aligns with the broader vision of the Cosmos ecosystem, where each application can build its own chain, benefiting from the security provided by Bitcoin. "Bitcoin has all these proof-of-work miners, but other chains need security, too. Bitcoin staking fills this gap, allowing these chains to leverage Bitcoin's security," Tse said.

Babylon is seeking to leverage Bitcoin's security for other use cases.
Babylon is seeking to leverage Bitcoin's security for other use cases.

Despite the technical innovations, Tse acknowledged the psychological barriers that Bitcoin holders face, especially after the collapses of Celsius and BlockFi. "Our job at Babylon is to educate the community about the importance of trustless, self-custodial solutions. Trustless solutions are at the heart of Web3. It's crucial to differentiate between centralized and decentralized protocols," he stressed.

The excitement around Babylon is palpable. When they launched their testnet in February, they saw 100,000 people stake within the first two days. As Tse pointed out, their following on X has also grown tenfold in the past six months. Looking ahead, Babylon plans to launch their mainnet in June, initially with a low staking cap to ensure security and gradually increasing it to allow more participants.

Tse is optimistic about the future, noting, "There's $1.3 trillion in Bitcoin out there. We don't need to educate every holder at once. We'll start with those familiar with Ethereum staking and expand from there, growing awareness and participation gradually."

As Bitcoin continues to evolve, projects like Babylon could play a crucial role in unlocking new functionalities and value. The goal is not just to view Bitcoin as digital gold, but to harness its digital nature to offer more dynamic and powerful use cases.

The opportunity is also quite large. If EigenLayer has exploded into a multi-billion dollar project by leading the re-staking efforts on Ethereum’s $400 billion ecosystem, Babylon could stand to capitalize handsomely on the granddaddy of them all that’s more than triple the size.

“I think the opportunity is more than just three times the size of Ethereum,” Tse said. “Bitcoins are just earning zero yield – most of them, 99% of them. We talked to many Bitcoin holders and the first question we always ask them is, ‘What do you do with Bitcoin currently?’ And inevitably the answer is nothing. So I think the fact that the lack of competition for other ways of earning yield bodes well for a protocol like us.”

Want to go deeper? Check out the educational Babylon deep-dive from our validator team at DAIC.

Coinage members can watch our full interview with David Tse above. To support our community-owned outlet, own it with us, and unlock other exclusive benefits, mint one of our Membership Passes today! Chat with Coinage in our Discord.


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