As an experienced crypto investor with a keen interest in Bitcoin and DeFi, I found the insights shared by Babylon’s co-founder at the Bitcoin MENA event particularly enlightening. His emphasis on the importance of trustless decentralized finance (DeFi) resonates deeply with my own investment philosophy.
The co-founder of Babylon outlined the reasons behind Bitcoin’s staking protocol being responsible for amassing billions of dollars in BTC, as decentralized finance (DeFi) began to take shape on the global cryptocurrency network.
At the Bitcoin MENA conference held in Abu Dhabi, Fisher Yu, the co-founder and CTO of Babylon, expressed his view to CryptoMoon that authentic Decentralized Finance (DeFi) based on Bitcoin (BTC) had not been realized until very recently. Although Bitcoin can be deposited or transformed and utilized in various decentralized applications (DApps), Yu contended that there remains an element of trust required.
In Yu’s words, “You must rely on others when it comes to Bitcoin transactions. When you engage in lending, you’re essentially handing over your Bitcoin to someone else, hoping they’ll pay you back. For more complex operations like smart contracts, you’d need to move your Bitcoin to another compatible blockchain.
As a researcher delving into the world of decentralized finance (DeFi), I’ve come across an aspect that mirrors the counterparty risk prevalent in traditional or centralized finance. Just as Yu explains, when you entrust your Bitcoins to another party for management or services, you relinquish control over them. This means they could potentially misuse or even abscond with your Bitcoins.
True Bitcoin DeFi shouldn’t trust any third-party
Yu emphasized that DeFi’s key advantage over CeFi is its trustless nature, which eliminates third parties. “True DeFi” is where users can simply trust the blockchain or the smart contract within the protocol, he said.
Babylon’s team claims to have invented Bitcoin staking, enabling DeFi on Bitcoin:
“We invented Bitcoin staking so that it is a native use case for Bitcoin, which does not require the Bitcoin holder to trust any third party. Similar to holding a Bitcoin or using Bitcoin for simple payment, you only trust Bitcoin and yourself. You do not have to trust anyone else.”
Yu mentioned that the staked Bitcoins within Babylon will serve as security for the proof-of-stake (PoS) blockchain the company intends to initiate.
Contrary to platforms like Ethereum and Solana that distribute their native assets as rewards for staking, Bitcoin doesn’t function that way. Instead, when you stake Bitcoin on a Proof-of-Stake (PoS) blockchain, your reward comes in the form of the native token of that specific PoS chain, rather than Bitcoin itself.
Babylon has attracted $3.5 billion in staked BTC
Babylon is gradually releasing its primary network, starting with Bitcoin owners securing their BTC. Later on, the firm plans to introduce a blockchain, which will be the first of its kind to be secured through Bitcoin staking.
During Babylon’s first phase of accepting Bitcoin stakes, the protocol received approximately 1,000 BTC, equivalent to around $100 million, within an hour. In the second phase, the company garnered 24,000 BTC, valued at about $2.3 billion at the time, in just 90 minutes.
In certain instances, individuals placed 500 Bitcoins at a time, as this was the highest amount allowed for a single transaction, according to Yu.
On December 10th, Babylon launched its third Bitcoin staking opportunity. According to a statement published on X, the Bitcoin staking protocol has successfully drawn in $3.5 billion worth of Bitcoin that is now being staked.
DeFi on Bitcoin will attract similar attack vectors
As the popularity of Decentralized Finance (DeFi) on Bitcoin grows, Yu admitted that it could encounter similar risks as other DeFi sectors, such as cyber-attacks and exploitation.
“DeFi is trustless, which assumes the code and the system run correctly. But if there is fraud in a code or a bridge system, people can lose money. So, in theory, they are safe, but in practice, there are many attack vectors that can happen. So, I don’t see Bitcoin DeFi as any different from those.”
Yet, Yu posits that the Bitcoin DeFi sector can draw insights from previous events in the DeFi market. “We’ve gleaned numerous valuable lessons from these occurrences,” Yu stated. “As a result, we can progress more swiftly and efficiently in refining our systems compared to other ecosystems.
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2024-12-12 11:59