It is well known that Staking and Restaking in the ETH ecosystem have always been popular tracks, contributing to the majority of TVL in DeFi. However, due to the lack of smart contract functionality in BTC, Staking for BTC has encountered technical bottlenecks. Babylon was the first to solve this problem by introducing Staking into the BTC ecosystem, leading to various explorations of BTC restaking based on this technology.

In simple terms, Babylon (@babylon_chain) has three main products: staking, restaking, and Babylon Chain.

BTC Staking

EigenLayer has achieved an evolution from 1 to 10 for ETH staking: ETH itself can already be staked, and EigenLayer allows it to be staked again. Babylon goes one step further than EigenLayer, starting from 0 to 1: making unstakable bitcoins stakable first, and then restaking them, achieving 1-10.

The basic functions required for Staking are: staking, unstaking, and forfeiture (shared BTC security requires honest nodes).

Staking and unstaking can be achieved through hash time lock functionality. The Bitcoin script language allows for time locks, enabling users to define a lock-in period during which the Bitcoin (UTXO) cannot be transferred. For example, if a time lock of 1000 Bitcoin blocks is applied to a Bitcoin, it will be locked for about a week, meeting the locking requirements for staking.

Forfeiture of staking can be achieved through Schnorr signatures. The Schnorr signature algorithm supported by Bitcoin has an interesting property under specific constructions: if the signer signs two conflicting pieces of information simultaneously, anyone who sees these two sets of signatures can reverse-engineer the private key of the signature. Babylon utilizes this property to construct a signature that can be used by Bitcoin holders to lock the staked bitcoins. After locking, the Bitcoin holder can use this signature to participate in the PoS system's consensus. If they attack the PoS system by voting irregularly during consensus, their Schnorr private key can be reverse-engineered by anyone, leading to forfeiture of their staked bitcoins.

Throughout the entire staking process, Bitcoin stakers do not hand over their bitcoins to anyone, nor do they hand over the private keys to unlock the staking, making it completely trustless.

BTC Restaking

By recording the hash values of key data (such as transaction hashes, important decisions, or state updates) of the PoS blockchain on the Bitcoin blockchain, "checkpoints" are established (a variant of inscriptions). Babylon is able to provide immutable timestamp proofs for this data, effectively anchoring snapshots of the PoS chain's state to the Bitcoin blockchain at regular intervals.

The main participants in the PoS network staking are coin-holding users, validator nodes, wallets, and so on. With the introduction of Bitcoin staking protocol, coin-holding users have expanded to include Bitcoin holders, validator nodes can choose to run validator nodes or run finality providers supported by Bitcoin staking, and wallets need to seamlessly support multiple currencies, including Bitcoin and native PoS tokens.

DA nodes, blockchain BP nodes, are typical application scenarios for BTC Restaking.

Babylon Chain

In order to use the restaking function, Babylon first created its own chain using the cosmos SDK and applied the staked BTC to the BP nodes of this chain. Because cosmos IBC itself is a cross-chain network and technology stack, Babylon's own restaking function is only applicable to other public chains based on cosmos.

As Babylon has only completed the BTC staking function at present, restaking has only been implemented for cosmos-based public chains, providing opportunities for other projects.

Chakra

Chakra (@ChakraChain) also implemented the restaking function based on Babylon, with the only difference being that Chakra used starkware technology stack instead of cosmos.

1. Stake BTC with Babylon to generate staking events.
2. Use Chakra (starkware) to generate ZKP for the staking event.
3. Staking ZKP is verified by nodes to provide security protection.
4. Use starkware SDK to create a chain.

Lorenzo Protocol

Lorenzo (@LorenzoProtocol) also implemented restaking based on Babylon staking, using cosmos SDK to create a chain. The innovation lies in the financial aspect, where the staked BTC is split into two tokens:

LPT (Liquid Principal Tokens): tokens equivalent to stBTC. YAT (Yield Accruing Tokens): interest tokens.

This innovative approach allows the Lorenzo protocol to separate the principal investment from the returns, providing flexibility for users in managing risk and returns. This model can attract various stakeholders, including those who wish to trade returns independently of the principal and those seeking to accumulate specific types of assets as part of their strategy.

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