A Vault First Roadmap - Catalysing Bitcoin DeFi

Our flagship Bitcoin staking protocol is the first trustless Bitcoin productivity protocol in the world. It allows native Bitcoin to be staked to provide proof-of-stake security to other networks and earn staking rewards, trustlessly and noncustodially. Since its launch 14 months ago, it has activated 90k+ ($10B+) bitcoins and currently has over 57k+ ($7B+) bitcoins staked. The Bitcoin stakers include both retail, whales, and institutions (including major CEXes).

These numbers are comparable to Coinbase’s cbBTC (60k) bitcoins. Bitcoin holders choose trustless staking over bridging, which arguably offers much more DeFi yield opportunities but requires centralized trust.

This compromise is now over. Babylon has recently invented a new protocol, the trustless Bitcoin vault protocol. This protocol allows native bitcoins to participate in any DeFi protocol on any chain, trustlessly and non-custodially. It makes Bitcoin liquidity borderless and programmable across all of DeFi. Typical use cases include Bitcoin-backed lending, Bitcoin-backed stablecoin, and Bitcoin-backed PERP DEX. The vaults also work in conjunction with the trustless Bitcoin staking protocol to further improve Bitcoin’s productivity

The key technological innovation behind the protocol is the ability for Bitcoin to verify smart contract state on another blockchain with minimal on-chain costs, enabled by cryptographic primitives of garbled circuits and zero-knowledge proofs.

Indeed, the trustless Bitcoin vault protocol is a game-changer.

Trustless Bitcoin Vaults: Catalysing Bitcoin DeFi

With trustless Bitcoin vaults, Bitcoin holders can finally safely tap into on-chain financial markets, which are more transparent, flexible and capital efficient than their off-chain counterpart. Take Bitcoin-backed lending, for example. The off-chain interest rate is 6-10%, and the lender usually demands custody of the borrower’s Bitcoin. On-chain, the number is only 4-5%, and with the help of trustless Bitcoin vaults, can be achieved trustlessly without a centralised lender.

For institutional Bitcoin holders, the trustless Bitcoin vault protocol has two important features. First, native bitcoins are not swapped into a wrapped Bitcoin asset by a bridge. Second, the native bitcoins in different vaults are segregated. So there is no mixing of bitcoins, which is the case when a bridge/wrapper is involved.

The at-scale engagement of Bitcoin holders in DeFi will empower DeFi products (lending, stablecoin issuance, perp DEX, option DEX, etc), their participants (asset issuers, market makers, liquidators, liquidity providers, etc), and the underlying blockchains.

The protocol will also bring a lot of opportunities for infrastructure and service providers. The protocol is built on top of cryptography-heavy infra, which is best suited to be supported by professional infra and service providers (custodians, digital banks, API providers, Bitcoin LSTs, liquidators with MEV capability, etc). In addition, financial service providers can also help their Bitcoin customers get DeFi exposure and generate revenue (e.g. through interest rate arbitrage).

A Multichain Vault Deployment Strategy

The Babylon trustless Bitcoin vault protocol works for any blockchains, but it has to start from somewhere.

Our utmost consideration is the safety and experience of Bitcoin holders. To this end, we prioritize the deployment and integration of the vaults with matured DeFi protocols (battle tested, deep liquidity, rich features) on large DeFi chains first, starting from Ethereum. Once we accumulate sufficient momentum, we will deploy trustless Bitcoin vaults on Babylon Genesis and other networks.  

This multichain strategy works very well for Chainlink and Tether. Instead of bringing all DeFi protocols to their own chain, they deploy their core product on other networks first to create massive adoption and value. Just like Chainlink brings universally needed price oracles to all blockchains, Babylon will bring universally needed bitcoins to all blockchains.

Maximizing Utility for BABY

With a multichain strategy that could maximize the product adoption and value creation as the solid foundation, there are many ways to create further utility for the BABY token.

BABY can be bridged to chains where the vaults are deployed, and be used for vault usage fee payments, infra provider deposits, governance, etc. In addition, any network fees generated from DeFi integrations (e.g., extra interest charges, premium charges, etc) could be used to programmatically buy and burn BABY.

There are also advanced tokenomics one could incorporate to drive the utility further, such as implementing VE model for DeFi integrations, leveraging BABY LST, and others. We will continue to work closely with the community to keep evolving the tokenomics for BABY and ensure a healthy and  fast-growing ecosystem.

Roadmap Update

To bring trustless Bitcoin vaults to the world as soon as possible, we are pursing an aggressive timeline of a mainnet launch early next year. To focus our engineering effort to achieve this ambitious goal, we strategically sequence the planned launches of Bitcoin-supercharged networks (BSNs) and EVM on Babylon Genesis to after the launch of trustless Bitcoin vaults. By focusing now on the trustless Bitcoin vaults, we are setting the foundation for BSNs and EVM to launch with unprecedented liquidity and adoption momentum.

We have communicated with all ecosystem projects on this roadmap change, and appreciate very much their understanding. In fact, we are currently collaborating with several of them on the development of the trustless Bitcoin vaults. We are also working with affected parties to minimize any disruptions.

Remarks

Trustlessness is the key to activate Bitcoin for DeFi and Babylon’s ethos. With the unwavering support from the Babylon community and close collaboration from ecosystem partners, the trustless Bitcoin staking protocol has activated $10B worth of Bitcoin and is counting. Now, with trustless Bitcoin vaults x staking, we aim at $100B Bitcoin.

$100B is a grand goal, but totally achievable. We welcome the community, builders, and institutions to join us in this next era of Bitcoin DeFi together. We are also hiring ambitious DeFi talents!

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