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Babylon's Staking Success Fuels Bitcoin DeFi Growth

Bitcoin has been primarily known as a store of value, but initiatives like Babylon are expanding its utility and attracting a new wave of developers and investors.

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Bitcoin's Layer 2 staking platform Babylon has experienced a meteoric rise in popularity, attracting around $1.5 billion in deposits during its recent staking round. This surge in interest highlights the growing demand for innovative Bitcoin-based financial services, including staking platforms like Babylon

Babylon's innovative approach allows users to stake their Bitcoin and earn rewards while providing security to new proof-of-stake (PoS) chains. The platform's second staking round, dubbed "Cap-2," saw a massive influx of deposits, with almost 24,000 BTC from 12,570 users, staked in just 10 Bitcoin blocks. It previously rolled out the first phase of its mainnet in August, when the protocol had an initial cap of 1,000 BTC.

This impressive uptake has catapulted Babylon to the forefront of the Bitcoin DeFi ecosystem, surpassing even the Lightning Network in terms of total staked value. While still significantly behind Ethereum-based DeFi projects like Lido and EigenLayer, Babylon's rapid growth demonstrates the increasing appetite for Bitcoin-based financial services.

Currently, Babylon does not offer any PoS staking reward nor incentives for participation. However the platform runs a points system, allocated proportionally based on each stake, with commissions paid to the finality provider, which are tasked with ensuring transaction finality on PoS networks that use BTC in their security models.

Unchain Crypto reported, citing Alessandro Maci, product manager at finality provider p2p.org, that most of the interest in Babylon is coming from providers of liquid staking tokens that take WBTC as collateral.

"Many of these platforms enable users to deposit WBTC into vault addresses, minting corresponding LSTs. In this process, WBTC acts more as collateral for the synthetic asset rather than being unwrapped for direct BTC staking,” Maci told said, Unchained reported.

Lombard, Solv and PumpBTC are the largest finality providers, with 7,167 BTC, 6,009 BTC, and 2,077 BTC delegated respectively.

Babylon raised $70 million in a funding round led by Paradigm earlier this year, following a $18 million raise in December 2023.

As Babylon continues to gain traction, it is likely to further fuel the development of Bitcoin-based DeFi applications. The platform's success could also inspire other projects to explore innovative ways to leverage the security and value of Bitcoin for new financial services.

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