In a significant move towards bridging the gap between decentralized finance (DeFi) and the Bitcoin blockchain, Polychain Capital and Hack VC spearheaded an $18 million Series A funding round for Babylon Chain. The startup is focused on developing a protocol for Bitcoin staking, aiming to integrate proof-of-stake (PoS) networks with the security and liquidity provided by Bitcoin.
The announcement on December 7 revealed that the fresh capital infusion will be instrumental in advancing Babylon’s Bitcoin Staking protocol. This innovative protocol allows PoS networks to stake BTC, injecting liquidity and security into emerging chains.
Unlike Bitcoin’s proof-of-work (PoW) mechanism, PoS chains rely on participants to validate transactions by staking the native coin. Babylon Chain envisions combining the best of both worlds, merging the security models of PoW and PoS.
Babylon Chain introduced its Bitcoin staking minimum viable product in October, addressing the inflationary pressure on PoS chains. By leveraging Bitcoin, these chains can attract capital through staking, thereby fortifying the security of emerging chains.
A key challenge highlighted in the startup’s lite paper is the ability to “slash all safety violations remotely without having a smart contract on the Bitcoin chain.” To overcome this, Babylon employs accountable assertions, finality gadgets, Bitcoin emulation, and timestamps in its protocol. The modular construction is adaptable to all PoS consensus protocols without necessitating a soft or hard fork of Bitcoin.
Staking on the Bitcoin network could open doors for developers to create solutions on the original blockchain, a challenge that has been faced by the pioneer cryptocurrency with a market capitalization of $847.8 billion. A recent Glassnode report revealed that 66% of Bitcoin’s circulating supply has been dormant for at least a year.
Commenting on the investment, Alex Pack, managing partner at Hack VC, emphasized Babylon’s potential to “unlock the largest blockchain asset” and enable Bitcoin-backed security services for the broader blockchain ecosystem. Other participants in the funding round included Framework Ventures, Polygon Ventures, Castle Island Ventures, OKX Ventures, Finality Capital, Breyer Capital, Symbolic Capital, and IOSG Ventures.
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