Babylon's successful staking technology and strategy in the first phase. Compiled by: Cobo GlobalRBabylon On the day of the mainnet launch, Cobo, based on Babylon's BTC Staking API, successfully assisted clients in staking over 742 BTC, accounting for over 74% of the total staked amount. This outstanding achievement highlights the stability and reliability of Cobo's technical solutions, as well as the efficient staking strategy of the project. To further explore the successful experience of the first phase of Babylon, on August 29th, Cobo, in collaboration with Foresight News, specially invited guests from Bedrock, Solv Protocol, Lerenzo Protocol, and PumpBTC to jointly review the technical and strategic aspects and discuss the winning strategies for the second phase of staking. The following is a compilation of Cobo's core points from the guests, for reference by Cobo users and readers. Key points summary: The core value of BTCFi lies in fundamentally changing the liquidity status of Bitcoin. It will transform Bitcoin from an asset with extremely low liquidity (currently, over 90% is illiquid outside of exchanges) into a mostly tradable and interest-bearing active asset. The potential to release the liquidity of Bitcoin is the most exciting aspect of BTCFi. The staking process faces many technical challenges, especially in high-concurrency environments. As a key infrastructure of the Babylon ecosystem, Cobo provides multiple core technical supports based on the Babylon BTC Staking API: secure custody based on MPC, flexible UTXO splitting, staking transaction pre-signing, batch broadcasting, and a dedicated unBonding API. Leveraging these technical advantages, Cobo successfully assisted clients in standing out in the first round of staking competition, staking 742 BTC, accounting for over 70%. Technology is only one factor for success. For large holders or project parties, it is also necessary to formulate effective strategies to achieve the best staking effect with limited funds, such as considering asset allocation and risk diversification, and formulating the optimal allocation plan based on market expectations and actual conditions. At the same time, carefully setting gas fees and other parameters to seek a balance between attracting user participation and ensuring project profitability. Analysis of the list of stakers shows that retail investors dominate, with the minimum staking amount being only 500 sats, indicating a strong demand for participation by small holders. Providing entry-level financial products for retail investors is crucial, considering that independent staking costs may exceed returns. Building aggregation services similar to Lido can enable BTC holders of all sizes to efficiently participate in the staking ecosystem and DeFi opportunities, and earn stable returns. For ordinary retail investors, storing BTC in the LRT project's fund pool or exchanging it for ERC20 assets for operations is a better choice. These methods help diversify risks, reduce costs, and avoid sinking costs from high gas fees. For users with DeFi or financial experience and a clear understanding of asset pricing, considering more medium-to-high-risk strategies to increase returns is advisable. Intermediate strategies include utilizing lending markets and leverage on platforms like Compound. Advanced strategies involve engaging in leveraged staking and interest rate swaps in the BTC ecosystem. These methods may bring higher returns but also increase risks. Security is the primary consideration during the staking process. Through comprehensive testing on the testnet and adopting Cobo's MPC technology, implementing whitelists and security measures effectively ensures the security of user assets and ensures that funds are only transferred to specified addresses. At the same time, considering that BTC price fluctuations may cause concerns about locked funds, it is also crucial for the project to provide flexible withdrawal capabilities. How to view the view that it is difficult for the Bitcoin network to achieve DeFi? Shen Yu: To understand the development trend of the Bitcoin ecosystem, we can draw on the development experience of the Ethereum DeFi ecosystem. Observing the leading protocols on Ethereum: the first is Lido, a Liquid Staking protocol; the second is Eigenlayer, a Restaking protocol; and the top ten also include ether.fi, RocketPool (RETH), and Binance's ETH staking products. This indicates that the TVL (Total Value Locked) in the Ethereum ecosystem is mainly concentrated in Staking and Restaking protocols. As a larger asset in terms of market value, Bitcoin holders have long faced a core issue: the difficulty of achieving low-risk or risk-free returns. In the past, Bitcoin holders typically had to stake their Bitcoin and borrow other assets (such as Ethereum or stablecoins) to earn returns. The emergence of Babylon is a major breakthrough. It is the first time in history that Bitcoin can be staked on its own network in a low-risk or risk-free manner and generate returns while keeping the wallet address locked. Looking back at the development of Ethereum, we can foresee that protocols like Babylon are likely to become the largest providers of TVL in the Bitcoin network. Therefore, we are very optimistic about the future development of the Babylon protocol and believe that it will bring new sources of income to the Bitcoin ecosystem. Ryan Chow: Shift of innovation focus: The previous cycle was mainly dominated by algorithmic innovation. We saw the emergence of AMM models, PMM models, and various lending models, which could ignite the market. In 2020, Ethereum's EVM environment was the most mature, so most algorithmic innovations defaulted to Ethereum. The two main variables of this cycle: a) Asset innovation: Compared to algorithmic innovation, asset innovation is more intuitive and more welcomed by retail investors. We can see that outstanding projects in this cycle, such as Ethena and ONDO, have innovated at the asset level, bringing new opportunities to DeFi and the entire industry. In this trend, the demand for innovative ways for assets like Bitcoin to generate returns will undoubtedly perform better and be more popular in the market. b) Breakthrough in the Bitcoin ecosystem: Previously, Bitcoin lacked this capability. Whether it was two years ago when Bitcoin was used as collateral or the infrastructure innovation such as Staking and Babylon that emerged this year, they have brought the possibility of generating returns to Bitcoin. Additionally, it is worth noting that the Bitcoin halving is a major catalyst for Bitcoin's large holders and the entire ecosystem. The emergence of new technologies like Runes and Inscriptions has provided users with new experiences for the entire ecosystem. The combination of these three elements has made Bitcoin's Staking, interest-bearing, or the entire BTCFi a very hot topic in this cycle. Matt Ye: The core of BTCFi lies in how to release the liquidity of Bitcoin and create value using this liquidity. We can refer to successful projects in the Ethereum ecosystem, such as Lido, EigenLayer, AAVE, Uniswap, and Curve. The fundamental principle of these projects is to lease the liquidity of asset holders to specific projects or protocols to generate returns. For example, Lido generates interest by leasing users' ETH to the Ethereum network and provides users with interest-bearing certificates. EigenLayer leases liquidity to its own protocol, allowing users to earn returns. The logic of lending protocols and liquidity pools is similar, essentially leasing liquidity to DeFi products, tools, or infrastructure to generate returns. If Bitcoin wants to develop a thriving ecosystem similar to Ethereum and create a stable, sustainable interest market, the key is to transform Bitcoin into an asset with high liquidity and high market efficiency. This process requires multiple steps to work together: first, custodians like Cobo provide secure Bitcoin custody and locking through MPC technology, and map out corresponding assets. This is an important first step. Secondly, we need to develop business logic that can effectively utilize this liquidity for interest. In this regard, Babylon provides a rich downstream interest-bearing scenario. Third, we need to establish an efficient liquidity leasing market and determine the best construction location for this market. The real opportunity of BTCFi lies in transforming Bitcoin from an asset with extremely low liquidity (over 90% is illiquid outside of centralized exchanges) into an asset with mostly released liquidity, tradable, and capable of generating returns. This transformation is the most exciting aspect of BTCFi. Zhulin Chen: The status of Bitcoin as digital gold has been widely recognized.

Now we are faced with the question: how to make Bitcoin better than gold? As we all know, gold does not generate interest, but instead requires storage fees and cannot produce returns. The situation with Bitcoin in the past was similar to gold, but now, based on Babylon's technology, we can lease the economic security of Bitcoin to other services. This is the first time that Bitcoin can generate returns, and it has two important characteristics: there is no market risk, and it can achieve long-term stable interest rates. This makes Bitcoin more advantageous than gold and becomes a higher-quality asset. Looking back at the concept of BTCFi, between 2019 and 2020, Ethereum attempted to release the liquidity of BTC, resulting in the emergence of many Bitcoin tokens on other chains, such as WBTC. This was mainly because Bitcoin itself lacked an execution layer for smart contracts. However, we observed that the circulation of WBTC on Ethereum was relatively low and mainly used as collateral. With the emergence of LSD (Liquid Staking Derivatives), the three-piece set of DeFi gradually took shape. This means that WBTC must transform into an interest-bearing asset to truly activate the circulation of the entire financial market. Of course, this is a completely new market, and everyone is making new attempts. In this context, Bedrock is more focused on ensuring the reliability and widespread acceptance of interest-bearing assets themselves. PumpBTC: The main change in this round of BTCFi is to transform Bitcoin from a low-liquidity state to a high-liquidity state. In the past, many projects attempted to build L2 solutions on BTC. The initial idea of the Babylon project was to use Staking to implement slash rules and solve the long-range attack problem. However, as it developed, they realized that simply recording state checkpoints of other chains on the BTC chain was not enough, as the performance of the BTC chain itself is limited. Therefore, Babylon introduced the concept of an intermediate layer, as a separate Cosmos chain to implement the time step aggregate layer. This layer helps compress and package the state of other chains, and then record it on the BTC chain. This evolution transformed Babylon from a simple timestamp service into a Cosmos chain independent of BTC. However, the core issue remains: where should high-performance, interest-bearing BTC be implemented? Where should users participate? Where should more DeFi protocols be combined? How to help users achieve higher interest-bearing capabilities? These are the key issues we need to explore. Babylon, as middleware and a Cosmos chain, mainly implements timestamp functionality and is relatively independent of the BTC ecosystem. PumpBTC sees Babylon as a transit station, not the final destination. In the future, there may be other Restaking protocols in the BTC ecosystem, just like the various Restaking products that already exist in ecosystems like Solana. Our goal is to help users transform native BTC in a low-performance state into a high-performance state more suitable for widespread use. We hope to use tools to enhance the interest-bearing capabilities of BTC. Our focus is to create better Restaking and interest-bearing opportunities for BTC that are already in a low-performance state, such as WBTC and BTCB. This is the ultimate transformation. Babylon is just one stop in this process, and there are many more stops in the future. Our mission is to empower users better and help them transform from low-performance to high-performance BTC. Overall, our goal is to create an ecosystem that enables BTC to realize its potential as a high-liquidity, high-yield asset, while providing users with diverse DeFi participation opportunities. Babylon's first round of staking experience, lessons, challenges, and success factors Shen Yu: In the first round, I personally invested tens of BTC and successfully staked all of them. The total amount in this round was very small, only 1000 BTC. The first feeling was that the competition was fierce, and we saw gas fees skyrocketing. Some project parties and users basically raised gas fees to one or two thousand without considering the cost. In the first few blocks, the competition was very intense. We used Cobo's MPC custody solution at the underlying level. Because we had participated in the purchase of Inscriptions and Runes on the chain before, we had accumulated some experience and lessons. So we prepared a batch of signatures early on. After splitting the UTXO, we prepared multiple levels of gas fees for each transaction, ranging from 100 to 1000. This allowed us to select the appropriate gas fee range for transactions based on demand and calculation models. During this process, we also dynamically broadcast transactions with different gas fee tiers based on the real-time gas fee situation on the network. Just in the second and third blocks, when the gas fees dropped to a certain level, our transactions were all confirmed. In this process, we used Cobo's MPC pre-signing mechanism to prepare a good gas fee gradient for each transaction. At the same time, a large number of transactions can actually be selectively broadcast, rather than initiating transactions and signing them after the opening, as there is not enough time, given the relatively short time window. A large number of transactions need to be prepared in advance. Zhulin Chen: Babylon's staking attracted a large number of users, but the limit of 1000 BTC restricted participation. Our goal was to help as many users as possible successfully stake. The final result was satisfactory: we received 400 BTC, successfully staked over 200 BTC, and kept gas fees below 1000, achieving the expected goal. The competition was already intense 3-4 days before the staking began. We summarized several key points of success: batch splitting, pre-signing, and RBF functionality are crucial, as these tools greatly reduce the number of manually signed transactions. Despite having tools to assist, our team and colleagues from Cobo still had to work overnight. Security was the primary consideration. Faced with the new Babylon protocol and staking process, we conducted comprehensive testing on the testnet a month in advance, including implementing whitelists and security measures to ensure that funds could only be transferred to Babylon addresses. With five years of on-chain transaction experience, we were well prepared for the timeliness and efficiency of transaction broadcasting. We adopted a rational strategy to complete staking in each block within a reasonable gas fee range, rather than blindly using the highest gas fee. Matt Ye: The two main challenges in achieving the best staking effect with limited funds are technical and strategic challenges. The technical challenge is that the staking process is not simply sending UTXOs and signing them one by one. First, we need to split BTC into small UTXOs of 0.05 based on Babylon's parameters and add gas fees. Through Cobo's API, we can pre-sign the staking. This is a huge task in itself. During the final broadcast, we also need the underlying Staking API to work normally, ensuring both security and full functionality. In this regard, Cobo, as the custodian, provided tremendous support. The strategic challenge is even greater. We need to determine the goals of the first phase of staking and the acceptable costs. As a liquidity staking platform, we have a responsibility to stake as much BTC as possible for users, clients, the community, and the Babylon ecosystem. At the same time, as a founding team with limited funds, we need to balance costs and returns. Although we have the ability to stake 1 or 2 million dollars, we need to consider whether it is worth spending such a high cost to stake more BTC. After lengthy discussions, we decided to set a target total staking amount, but it may not necessarily be 250 BTC. We need to give customers a satisfactory answer while also setting a cost ceiling for ourselves. This ceiling may be lower than what everyone imagines. Based on these considerations, we researched gas fee tiers, batch plans, and when and which block to stake. We designed 20 or 30 sets of plans and automatically deployed strategies to stake UTXOs on the chain based on the actual gas fees and gradients. Our strategy was very successful. In the first block, we staked over 125 BTC, and most UTXOs were completed at this time. Our average staking cost was much lower than the base price of high gas fee blocks (over 1000 Sats), helping users achieve a staking rate of over 50% while controlling costs. Looking back on this experience, we believe it was a very good strategy. We fulfilled our responsibility to the Babylon ecosystem and customers while achieving high output at minimal cost.

We are researching the next staking strategy, considering factors such as Babylon's parameter settings, market expectations, and demand. We realize that the root cause of intense gas fee competition lies in the high expectations of all parties for staking amounts, which may lead to irrational behavior in the market. Therefore, we will reasonably consider community commitments, team economic capabilities, and attempt to incorporate irrational market factors into our considerations, using dynamic strategies to cover at least 80-90% of market situations. PumpBTC: From a technical perspective, the core is the underlying API. Without the mature products and complete technical support provided by Cobo, our team would find it difficult to achieve secure and efficient splitting logic. This means that all algorithmic strategies regarding preemption quotas would be impossible to implement. Cobo's technical expertise is crucial for us, and its reliability and effectiveness are self-evident. On the strategic level, whether it's investment or preemption quotas, it essentially involves balancing costs and returns. We conducted a comprehensive assessment early on within a limited budget and set relatively conservative goals: as long as we could enter the top three, it would be considered a success, and we were not fixated on vying for the first or second position. We believe that achieving the third position is already a satisfactory outcome. From the results, our performance exceeded expectations, obtaining the fourth position at a lower cost than anticipated, and the gap with the third position was very small. Considering our initial goals and actual investment, this result was very satisfying for us. For the upcoming second phase, we are conducting in-depth research. We believe that the successful experience from the first round is still applicable: with reliable underlying technical support such as the Cobo API, we can further optimize our algorithms. The key consideration is how to balance investment costs and ranking goals. Nevertheless, our overall strategy and logical framework will remain consistent with the first phase, with adjustments made in detail to adapt to the new market environment. Advice for Bitcoin retail investors Shen Yu: For ordinary holders, the best choice is to put BTC into the pools of various LRT projects or exchange it for other ERC20 assets that have already been tokenized, such as FBTC, WBTC, and then engage in yield farming. Because the quota for Babylon is still limited, the probability of direct participation for retail investors is not high, mainly for two reasons: there is a high competition cost, and the project parties have made technical preparations, making manual snatching unrealistic, usually in a five-to-one state. Therefore, if you want to participate, especially before the quota is open, you can only use some other methods and channels. This can spread some costs and also avoid high gas consumption. Because for staking like Babylon, even if you don't win, your cost is a sunk cost. So for retail investors, I think this is a better option. For large holders, they may need to consider asset allocation and risk diversification, which requires some matching based on different expectations and situations. Zhulin Chen: Entry-level risk-free strategy BTCFi is welcoming new opportunities. Users should first consider risk-free LST and LRT markets, similar to the strategy of early participation in Lido. Because these products do not involve BTC trading or borrowing, the risk is relatively low. Intermediate risk strategy - lending market If you are pursuing higher returns, you can consider the lending market. For example, Compound will soon support uniBTC and PumpBTC, allowing users to use leverage to increase their returns. Advanced risk strategy - complex products Furthermore, users can choose complex strategies. For example, the Pendle project allows users to use YT (yield tokens) to achieve higher returns. We may soon release related announcements, including potential interest rate swap markets. In addition to Babylon, other re-staking protocols such as EigenLayer are also worth paying attention to. uniBTC may support these protocols, achieving a "dual mining" effect. Overall, it is recommended not to exceed three steps in participating in the chain to control risk. Users should choose a suitable strategy combination based on their own risk tolerance. Ryan Chow: The importance of simplified entry For retail users, the key is to simplify the entry. When participating in various BTCFi-related products, if the path is too long, it will greatly increase the user's operational difficulty, understanding difficulty, and cost. With each additional step, these costs may increase tenfold. Therefore, reducing the user's entry cost is crucial. We currently have nearly 400,000 BTC staking users, mainly because our entry is simple enough, effectively solving this problem. The value of product diversity Product diversity is crucial. Various Bitcoin investment opportunities have emerged in the market, including BTC yield products in CeDeFi, etc. Different users have different needs, so diversified choices are important, such as products like Core and Bouncebit. Nevertheless, our market testing shows that Babylon's yield products are the most popular. These Bitcoin opportunities have different adaptation needs for different users. So, how can we solve users' adaptation issues as diversely as possible, meeting their diverse Bitcoin needs? This is crucial for the development of BTCFi. Market response and user choice Personally, I am most optimistic about Babylon's yield. We conducted a lot of market testing to let users provide answers. The test results showed that Ethena raised 2500 BTC within a week. In comparison, although Babylon is only open four times a month for two minutes each time, it has obtained more staking at a lower cost than expected. This indicates a certain consensus in the market regarding yield. Among many products, if 2-3 are particularly popular, it means that these products better meet user needs. The market's choice is clear. The importance of infrastructure In this process, companies like Cobo play an important role in asset custody, secure operations, and permission settings. We have cooperated with Cobo on yield products such as GMX, Ethena, and Babylon. This highlights the importance of infrastructure in providing user returns. Matt Ye: By analyzing the list of stakers, we found that retail investors dominate, with the minimum staking amount being only 500 sats. This means that for these small retail investors, independent staking costs may exceed returns. Therefore, our platform aggregates users' BTC, allowing all BTC holders, regardless of scale, to participate in the staking ecosystem and DeFi opportunities. This model is similar to the service provided by Lido for small ETH holders, allowing retail investors to obtain stable BTC staking returns. We not only provide a simple staking entry but also develop more complex and diversified financial tools. Although there is a high demand for passive financial management, we focus more on advanced products. For example, the leverage staking product we launched has been used with 8-9 times leverage. The main difference between Babylon and Ethereum is that you can stake multiple assets, not just ETH. Projects like EigenLayer theoretically can also stake multiple assets, but Babylon's ecosystem is more mature and prosperous. Many ready-made PoS systems can be directly integrated with Babylon, greatly accelerating the expansion of the ecosystem. In fact, many PoS projects are waiting for Babylon to go online to join the secure BTC staking network. In the future, we plan to develop an interest rate trading market. As Babylon opens up more PoS options, the yield structures of different staking methods will show significant differences. We are laying the groundwork for this market in advance, allowing interest and assets to be freely traded. We hope that different users can have different choices and preferences on the platform, obtain different interest structures, and conduct interest rate trading on our platform. Our target customers lean towards those with DeFi or financial experience, and a clear understanding of asset pricing. This reflects our focus on advanced user needs and our emphasis on complex financial products. PumpBTC: For ordinary users, the core consideration for staking BTC is security and liquidity. Once the price of BTC fluctuates, users are concerned about the risk of their funds being locked and causing losses. In the current market environment, liquidity is crucial, and a lack of withdrawal capability will hinder users from participating in other investment opportunities. LST projects should focus on providing better liquidity while ensuring security. Our PumpBTC withdrawal feature will be launched in sync with Babylon, directly addressing users' liquidity needs. This feature eliminates the main psychological barrier for users. In terms of security, our integrated custody solution at the underlying level is superior to personal use of cold wallets, providing users with a higher level of asset protection. We also focus on providing diversified investment opportunities. Through innovative gameplay such as dual mining, users not only gain liquidity but also participate in potential high-yield airdrop activities, meeting different risk preferences.

Looking ahead, new gameplay such as lending and leverage trading based on LST will continue to emerge. With our advantages in flexibility, security, and diversification, we are confident that the BTCFi field will continue to thrive in the second half of the year, bringing more value to users. Project Introduction and Role in the BTCFi Ecosystem Cobo is a professional digital asset custody technology solution provider. Due to the limited scripting capabilities of Bitcoin, a large amount of BTC assets need to be mapped from the mainnet to various layer-two networks. In this process, Cobo provides a co-management solution based on multi-party computation (MPC). This solution stores assets in an MPC wallet and then performs cross-chain mapping, achieving efficient and secure cross-chain asset transfers. Bedrock, with five years of node service experience, is dedicated to creating the safest and most recognized Liquidity Staking Token (LST) service in the Babylon ecosystem. Bedrock's uniBTC product provides comprehensive slash risk protection and brings substantial returns to users through professional operations and innovative development. Solv Protocol is the largest BTC Staking platform on the network, managing over 20,000 diversified staked bitcoins. Solv has prepared over 3,000 bitcoins for staking in Babylon and successfully secured 250 slots in the previous round. It is expected that over 10,000 bitcoins will be staked in Babylon in the next 2-3 rounds. Lorenzo Protocol is a liquidity staking platform based on Babylon, focusing on the generation, settlement, and trading of Bitcoin interest-bearing notes. Lorenzo closely collaborates with Babylon to provide users with diversified choices, allowing them to stake Bitcoin liquidity on different PoS chains and obtain corresponding interest-bearing notes. Lorenzo also provides a secondary trading market for these notes, offering comprehensive DeFi infrastructure for the Babylon ecosystem. PumpBTC provides LST services based on Babylon and other Restaking protocols, aiming to address the liquidity issues of Bitcoin assets by converting various forms of BTC (native or wrapped) into interest-bearing assets. Through partnerships with FIL, Brea Chain, and others, PumpBTC offers staking returns to users. PumpBTC utilizes Cobo custody technology to maximize asset security.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。