The economic security of Bitcoin provides additional protection for PoS networks

The Babylon project is exploring the use of the robust economic security of the Bitcoin network to provide an additional layer of protection for other blockchains. This project allows BTC holders to provide security support and earn rewards for PoS blockchains through a special staking mechanism without leaving the Bitcoin network. This innovative approach aims to bring the advantages of PoW into the PoS ecosystem, achieving a complementary advantage between the two consensus mechanisms.

The core mechanism of Babylon includes:

1. "Remote Staking": Keeps staked BTC on the Bitcoin mainnet.

2. Customized Staking Contracts: Create special types of transactions using Bitcoin scripts and restrictions to achieve staking lock-in functionality.

3. Cross-chain communication: Using the Cosmos IBC protocol to transmit messages and data between Bitcoin and other blockchains.

4. Enhanced Security Layer: Key data hashes of the PoS chain are recorded on the Bitcoin blockchain, establishing "checkpoints" to provide immutable timestamp proof for this data.

This solution allows BTC holders to earn additional yields while maintaining asset sovereignty, and the PoS network can enhance its own security by leveraging the economic security of Bitcoin. Babylon achieves the integration of PoW and PoS security mechanisms through clever design, bringing new possibilities to the blockchain ecosystem.

Analysis of the Babylon Project Architecture and Mechanism

The overall architecture of the Babylon project includes the following key components:

1. Bitcoin Mainnet: As the underlying network, it stores staked BTC and provides timestamp services.

2. Babylon Aggregation Layer: Responsible for collecting and processing data from PoS chains.

3. IBC Communication Protocol: Enables data transmission between the Bitcoin network and other blockchains.

4. Target PoS Blockchain: Accept additional security protection provided by Babylon.

The core mechanisms of Babylon include:

Remote Staking

Allows BTC holders to provide staking services to other networks without transferring assets. This method ensures autonomous control of assets and avoids the risks associated with operations through third-party intermediaries.

Customized Staking Contracts

Due to the Bitcoin network not supporting complex smart contracts, Babylon implements staking functionality through customized UTXO operations. This special type of transaction allows users to lock BTC for a certain period, and the assets can only be redeemed after the locking period ends.

Data Submission and Verification

1. The PoS chain node generates the hash value of important data.

2. Babylon aggregates these hashes and sends them to the Bitcoin network via IBC.

3. Data is timestamped on the Bitcoin blockchain, forming a "checkpoint".

4. PoS chains can use these timestamps to verify the accuracy and timeliness of the data.

Security and Penalty Mechanism

Babylon adopts Schnorr signatures and EOTS( extractable one-time signatures ) to ensure system security:

• Schnorr signatures provide efficient aggregate signature functionality.
• EOTS is used to automatically extract private keys and execute penalties in the event of a double spending attack.

If a staker attempts to double spend, their private key will be exposed, allowing anyone to initiate a transaction to burn that staker's BTC. This mechanism implements a penalty system similar to PoS chains under Bitcoin's limited scripting capabilities.

Market Space and Advantages of the Babylon Project

Currently, the yield on most single Bitcoin investment markets is between 0.01% and 1.5%, with limited high-yield opportunities. Meanwhile, the amount of idle BTC is enormous, with about 25% of the BTC supply having not moved for over 5 years, and 67% not moved for over 1 year. This indicates that BTC holders have a demand for earning yields, but are constrained by low returns and safety concerns.

If Babylon can offer a yield close to 8%, it may attract a market size of tens of billions of dollars. Combined with its decentralized features and the advantages of native BTC staking, Babylon is expected to impact a market scale of tens of billions.

Babylon primarily addresses the following issues:

1. Implement BTC native staking on the Bitcoin network to provide higher yields.

2. Reduce the security budget and token emission pressure of the PoS chain.

3. Provide PoW security supplement for PoS chains to mitigate the risk of "long-range attacks".

4. Raise the threshold for PoS chains to resist "liveness attacks".

Compared to Eigenlayer, Babylon has differences in the following aspects:

• Limitations: Lack of support for smart contracts, functionality is relatively restricted.
• Reliance on IBC: Currently mainly aimed at Cosmos ecological chains that support IBC.
• Advantages: Targeting the idle BTC market, there is huge potential.
• Similarities: Both provide economic security support for small-scale PoS chains.
• Differences: Babylon may have an advantage in mitigating long-range attacks and shortening the staking lock-up period.

Overall, Babylon introduces the security of Bitcoin's PoW into the PoS ecosystem through innovative methods, bringing new possibilities for blockchain security. Although it does not match Eigenlayer in functional flexibility, it has unique advantages in targeting the BTC market and specific security needs.