Bitcoin Staking on Babylon: All You Need to Know (In a TLDR Form)

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Babylon is a novel chain that uses Bitcoin features to provide security to PoS chains. It does this with the design of two protocols:

  • Bitcoin timestamping: allows verifiable timestamps of any data from consumer chains ( ie other PoS protocols) to be sent to Bitcoin. 
  • Bitcoin Staking: allows native BTC to provide economic security to other chains in a non custodial manner. 

So here’s the tldr of Babylon’s unique Bitcoin Staking Mechanism.

Native Bitcoin Staking

  • Babylon enables staking directly on the Bitcoin network without smart contracts or bridges. No need for wrapped BTC or any custodial solution. 
  • Bitcoin's native scripting language (Bitcoin Script) is used to define conditions for staking and fund withdrawal.

How Staking Works

  1. Covenant Committee Verification:
    • A quorum-based committee validates staking requests, including unbonding and slashing conditions.
  2. Delegator Specification:
    • Delegators choose a Finality Provider like Chainflow, BTC amount, and timelock duration for staking.
  3. BTC Remains in Wallet:
    • Staked BTC is locked by conditions but never leaves the delegator's wallet.

Ending Staking Period

  1. Timelock Expiry:
    • Default maximum timelock: ~15 months (64,000 blocks). BTC becomes spendable after timelock ends.
  2. Early Unbonding:
    • Delegators can override the original timelock with a shorter duration (~1008 blocks) upon Covenant Committee approval.
  3. Finality Provider Misbehavior:
    • Double signing by a Finality Provider triggers slashing. Pre-approved slashing conditions are executed, including partial BTC burns.

Summary

When staking your Bitcoin to a Finality Provider such as Chainflow, you are sending a transaction to lock your BTC in a self-custody vault. This creates a UTXO with two conditions: 

  1. A timelock for withdrawal, and 
  2. A one time signature (EOTS) setting slashing conditions. This ensures that a Finality Provider does not misbehave, as doing so would expose the private key allowing anyone to submit a slashing transaction to burn 33.3% of staked BTC. Another reason why its important to choose trusted finality providers like Chainflow. 

Babylon’s mechanism bridges Bitcoin’s PoW system with dPoS-like staking functionalities using existing Bitcoin features, offering a secure and decentralized way to enhance PoS chain security.

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