Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Babylon: Self-Custodial Bitcoin Native Staking & Bitcoin-Secured Networks - David Tse

Episode Date: January 14, 2025

Throughout the years, there were many attempts of tapping into Bitcoin’s liquidity and security, but almost all of them came with different caveats. Most notably, wrapped BTC (wBTC) depended on the wrapper contract security. However, the recent surge in research and development for native solutions has led to breakthroughs previously thought impossible. Babylon launched native BTC staking and plans to further expand this to secure other blockchains, in a model similar to that of mesh security. This would not only help secure other networks, but it would also unlock liquidity from the mother chain through liquid staking derivatives.Topics covered in this episode:David’s backgroundThe evolution of BabylonThe Bitcoin RenaissanceTechnical challenges of implementing Bitcoin stakingThe OP_CAT upgradeBabylon’s Bitcoin staking & Bitcoin-secured networksBridging liquidity & LSTsSecuring multiple chains and slashingBabylon chain - aggregating Bitcoin-secured networksCould Bitcoin become a POS chain?Babylon upgradeabilityEpisode links:David Tse on XBabylon on XSponsors:Gnosis: Gnosis builds decentralized infrastructure for the Ethereum ecosystem, since 2015. This year marks the launch of Gnosis Pay— the world's first Decentralized Payment Network. Get started today at - gnosis.ioChorus One: Chorus One is one of the largest node operators worldwide, supporting more than 100,000 delegators, across 45 networks. The recently launched OPUS allows staking up to 8,000 ETH in a single transaction. Enjoy the highest yields and institutional grade security at - chorus.oneThis episode is hosted by Brian Fabian Crain & Sebastien Couture.

Bitcoin, such a viable asset, such a strong security source, is totally isolated from the proof of state world, which is exploding. Is there a way to combine the two together so that the whole crypto system can benefit as a whole? And that's where the idea of Babylon comes from, which is to share Bitcoin security with proof of state networks. And we came up this concept of Bitcoin sticking. Although Bitcoin does not support smart contract like Ethereum does, there are still a lot of small things you can do around it to make things work without a soft form. Oh, but the breach over liquidity is the key to the story. Welcome to Episand, the show we talks about technology, robotics,

and people driving decentralization and the global blockchain revolution. So my name is Brian Crane and I'm here with Cébertzien-Couture, co-s-epresenter, and we're here today with David Say, who's a professor at Sanford, and he's also the founder of Babylon. Babylon is a very interesting project that's using Bitcoin security and Bitcoin staking to basically secure additional networks and services

and that's gotten a lot of fraction over the last year. So I'm really excited to have David on today. And just before we get in with David, a few words from our sponsors. If you're looking to stake your crypto with confidence, look no further than Corse 1. More than 150,000 delegators, including institutions like BitGo, Pintera Capital and Ledger trust Corus 1 with their assets. They support over 50 blockchains and are leaders in governance or networks like Cosmos

ensuring your stake is responsibly managed. Thanks to their advanced MEV research, you can also enjoy the highest staking rewards. You can stake directly from your preferred wallet. Set up a white label note. Restake your assets on eigenayer or symbiotic or use their SDK for multi-chain staking in your app. Learn more at chorus.1 and start stacking today. This episode is proudly brought to by NOSIS, a collective dedicated to advancing a decentralized future. NOSIS leads innovation with circles, NOSIS pay and Metri, reshaping, open banking,

and money. With Hashi and NOSIS VPN, they're building a more resilient privacy-focused internet. If you're looking for an L1 to launch your project, NOSIS chain offers the same development development environment as Ethereum with lower transaction fees. It's supported by over 200,000 validators making NOSIS chain a reliable and credibly neutral foundation for your applications. NOSIS Dow drives NOSIS governance where every voice matters. Join the NOSIS community in the NOSISDAO forum today. Deploy on the EVM-compatible NOSIS chain or secure the network with just one GNO and affordable hardware. your decentralization journey today at nosis.io.

David, thanks so much for joining us today. It's a pleasure to have you on. Great to be here, Brian. The question we love to start this show with is just what's your crypto journey? How did you get first interested in crypto? Yeah, so my background is a researcher. So in my early days of my career,

I was doing research on wireless communication, how to make cell phones work back in the day when I started. Only 1 million people have cell phones around the world, and now everybody has cell phone. So there was a revolution going on, and my research contributed to that revolution of making cell phones more efficient. So now we're forward.

We're at 2018. So at that point, this mobile wireless revolution has already quite mature, and I was looking for a new research area. And I came across Nakamoto's white paper, and that was my first exposure to crypto. And I read that white paper, and I got completely blown away by the beauty and elegance and the power of the ideas. And I started a research group at Stanford devoting exclusively to research in crypto.

And at this point, I'm still the only research group at Stanford, exclusively focused on crypto research, crypto as in blockchain research. Yes. Oh, that's interesting. Yeah, yeah. Because, I mean, Stanford has a long history, right, with blockchain research. I know there's like Dan Bonnet, I think, who's early on. And I mean, a lot of things that came out of Stanford.

No, that's kind of blockchain related. Yes, correct. Dan Bonnet is, of course, one of the world's famous cryptographer. His group, however, is very broad, focuses on cryptography. And blockchain is one of his applications. I would like to distinguish in our group the focus is exclusively on blockchain. So all our research is driven from blockchain.

Okay. And then how did that evolve into Babylon? Our journey, our research journey, started with Bitcoin, right? Nakamoto's white paper. However, what happened in the past few years is that the research and the development has entirely shifted the energy into proof of state networks, which can have left Bitcoin in the dust in terms of technology development.

However, Bitcoin remains a very valuable asset to this day is 50% of the crypto market, more than 50% of the crypto market, and its security is unparalleled compared to any other blockchains. And so the idea we had at some point was, hey, Bitcoin, such a viable asset, such a strong security source, is totally isolated from the proof of state world, which is exploding. Is there a way to combine the two together so that the whole crypto system can benefit as a whole? And that's where the idea of Babylon comes from, which is to share Bitcoin security with proof of state networks. And we came up this concept

of Bitcoin sticking, which is to convert this one point, at this point, I don't know, 1.5, 1.6, 1.7 trillion asset to a stakeable asset, and that's where Babylon arrived. So I was in 2017, right, a CEO of tendament to the company that started the cosmos ecosystem. I remember hearing about Babylon last few years ago, and I think the way I remember it back then was the idea that you could take these proof of stake blockchains,

and they could basically use Bitcoin as a sort of time stamping server or a timestamping place, right, where you put sort of a hash of the blockchain block in there. So then if someone joins new, right, some some proof of sake networks, they could sort of go to the Bitcoin blockchain and make sure that, you know, it's really the authoritative chain that they're talking with. Was that the original idea or how did this kind of evolve? Yeah, Babylon has an interesting story from from a point of view of evolution technology. So the North Star of Babylon

has always been sharing security from Bitcoin to approval of state networks. That's always been our focus from day one. However, the means and the technology in the protocol by which it does have gone through an evolution. So our original idea was actually an idea of Nakamoto, which is called Merch Mining.

So Merch Mining was an idea that was invented by Nekamoto in around 2010, 2010, 2011 time frame, the idea is that Bitcoin miners can simultaneously mine on another proof of blockchain. And we were using that idea to see we can share security proof of state networks. And then we turned out that we find out some security issues with merge mining. And so we moved on to this time stamping protocol. That was our second invention. That's what, Brian, that's what you talk about. Time stamping is basically sending a hash of the signatures of the validators of the proof of state networks onto Bitcoin so that you can have a

timestamp on these blocks and it gives you Bitcoin security. However, timestamping has one drawback. And the drawback is that because Bitcoin is so slow, time stamping is a very slow process. So this scale security is very slow. And as you know, one of the strengths of proof of state networks is that you get very fast confirmation. A few seconds. As a few seconds, as a opposed to Bitcoin, which is minutes or even hours. And so time stepping doesn't really give us that fast confirmation strengthening of proof of stick security. And so our third idea was to use the Bitcoin, not the chain itself, but the asset to provide security. And that's what Bitcoin sticking came from. And because you're using the asset, now you can keep the fast confirmation

of proof of state networks, but strengthen it by increasing their money. of capital by adding the Bitcoin capital to provide a security. Yeah, it's really impressive to see Babylon's evolution since those early days when you guys were working on time stamping. I did a podcast with Fisher at Cosmoverse in Medellin, and you had just announced this Bitcoin time stamping mechanism that effectively, as a product, would allow delegators on proof of stake networks to withdraw their capital faster, which was like a really interesting idea in itself. But then this Bitcoin staking idea emerged from there.

I wonder, you know, coming from the research side of things, and specifically, you know, as a product that aims to, I mean, effectively turn Bitcoin assets into a derivative that would then secure other networks and everything that that implies, you know, what was the reaction, what has been your interaction or your reaction with, you know, the Bitcoin community, which typically is a little bit more conservative. and from my perspective, perhaps a little bit more close off to those ideas. And how has that conversation changed over the last two years

as we've seen more and more Bitcoin L2s and more things being built on top of Bitcoin? Yeah. So when we started with this Bitcoin sticking idea, it was about 2023, about summer of 2023. That's when we came up with the light paper for Bitcoin sticking and we started talking to various communities.

And indeed, the Bitcoin OGs are supposed to be quite conservative. However, I must say, overall, we find the reception pretty good. And I think we're helped by a few external forces. So you remember, earlier that year, Ornodes started. Ornodes started. And that was sort of a mindset change to Bitcoiners that, hey, you know what, Bitcoin has more use cases than just hoddle and a payment system. And I think that was a very important time change for us.

And as you mentioned, at the later part of that year, Bitcoin L2 started emerging and so forth. And I think we kind of helped by that broader movement of sort of a new way of look at Bitcoin. We call it Bitcoin Renaissance. And I think we became sort of a leader of that movement because we started doing this research a few years back. And I think the timing was the helpful to us.

So in this discussion, right, on Bitcoin and sort of what is enabled on the L1, and should there be some kind of upgrades that allow more expressivity, more, I don't know, some kind of minimal smart contract, better bridging, has been there for a long time. I'm curious, can you talk a little bit about, you know, the technical challenges? Because, I mean, Babylon, because I think so far still, like, not a lot of upgrades have happened in Bitcoin and it's still, like, very limited. So how did you guys manage to enable that staking functionality in Bitcoin? Yeah, in fact, when we were discussing about Bitcoin staking, one of the early idea we had,

in fact, it was through discussion with Sunny Algoal, you're talking about the cosmos ecosystem. So in fact, Sunny came to me in one of the East, you remember at the Cosmoverse in Meta-In, sunny talked about mass security, mass security, and that was the security between Cosmos blockchains. and East Denver, which was in 2024 very early, he came to me and said, hey, wouldn't it be great to do mass security with one of the producer security as Bitcoin? That would be great. And so the initial idea we were discussing with Sonny,

I still remember very vividly, was, hey, wouldn't it be great if we can bridge Bitcoin to one of these cosmos chains like Babylon or osmosis and then share security through the match security network. Okay? So that was our sort of an initial thought. But then we had a problem because bridges from Bitcoin to any chain is well known to be very hard to build to be secure.

And to this day, there's no secure Bitcoin bridge beyond just like a multi-sig bridge. And then we went back to history and we noticed that in 215, there was an effort called Drive Chain. which is to upgrade Bitcoin to enable such a bridge to happen. It's called Drive-Chice. You can look back.

I think the first proposal came out around 2015 timeframe. But then I talked to Stanley. I said, you know, Sunny, there's a problem here because today we are 24. And this proposal was issued in 2015 and still not passed yet. So I don't think we should wait for this drive chain to happen because this is nine years down the road here. And who knows, we may have to wait nine more years. And so we started thinking, but after this discussion was sunny,

I came back to the team, we started discussing very actively. And what we figure out, basically, to achieve Bitcoin sticking, is really a way to sort of bypass this smart contract limitation and still enable Bitcoin sticking without any soft fork. And so one of the key sort of new ideas this past year from my research point of view is that although Bitcoin does not support smart contract like Ethereum does, there are still a lot of smart things you can do around it to make things work without a soft form.

And so that has been sort of our sort of drive to accomplish that. And for Bitcoin sticking, we accomplish that. And you may also know new ideas like BitVM bridge, for example. That is another way of sort of trying to accomplish that, a different functionality, bridging in that case, without soft fork. How important is this OpCat upgrade? And maybe perhaps we'd be helpful to provide some context here as to what that upgrade enables

and why so many projects building on Bitcoin are just like waiting for that to come online. Oh, so OpCat is actually. a very powerful thing. Op-Kat is basically concatenating two strings together. Sounds like something stupid, something very basic, but yet Bitcoin scripting doesn't support that. In fact, it was in the original version of the big conscripting language by Nicomoto, but it was deleted by Nakamoto himself. And so the effort here is to restore that op-code. Now, one, it can accomplish many things, But one thing it can accomplish through some trickery is this notion of covenants, this notion of covenants.

That is, you can write a Bitcoin script to define how you spend the money. In other words, you can't just spend the money by signing and then send it to anyone else. You can put restriction on where and how and how much to spend to who. that is not possible in the current Bitcoin scripting language. And enabling that turns it to be rather powerful. And it could make many things much simpler and significantly cheaper in terms of transaction fees. In other words, instead of writing a lot of code

and having to a huge script, you can get by with a much more compact script. And that's what OPECAT enables. Does it also enable multiplication? Is it useful in the ability to do proofs on chain as well? Yes, so there's a lot of effort by Starknet and a few teams to do so-called a ZK proof verification on chain using OpCat. And I'm not expert in that area, and my research does not cover that problem.

but I do believe it does help with some field multiplication. I think the stock, the version of stock is called circle, circle stock. And that enables some multiplication, but I'm not an expert in that area. So, yeah. Okay, got it. Are you aware of any of the current attempts and presumably like the ZK proof that was done on chain by the Bitcoin OS team and some of the work being done over by the Bitlair team to do a proof on chain? So to be clear, to be clear that these efforts are not doing proof on chain. The proof is

generated off chain. And so the challenge here is to verify where the proof is a correct proof on chain so that you can tell Bitcoin to spend the money to the appropriate person. Yeah, my statement was inaccurate, right? You want to verify the proof on chain. Yeah, because proof generation is typically a very expensive process, and so there's no way you can do it out of check. But the verification typically is much cheaper than proof verification, but for Bitcoin, even that proof verification, is very tricky to do because of the primitiveness of the Bitcoin scripting language. And so all these efforts are trying to do that. So here there are two efforts, two types of two approaches to solve this problem. And one is, as you mentioned, using, assuming OP can is past,

then you can implement more efficient, say, multiplication that you mentioned. Okay, so that's one effort. But that effort has a problem because it assumes O.P.C. And I don't think we're close to seeing O.P.C. And so the other effort is not assuming O.P.C. But using an approach called optimistic verification. Optimistic verification, which means what? Which means that in optimistic case, you don't verify anything.

You just assume that the bridge operator is correct in the assertion. But only when you are challenged by an external challenger, then you do the verification. And that verification you can do cheaper because the challenger can pinpoint a specific part of the computation or the verification and say, hey, you know what? I think this part you've cheated. Please show me to correct your verification of this part, and I can convince Bitcoin that you're actually wrong. And so, and this is a bit like the Abitram type ideas. And I think that approach is, in some sense, more practical because it doesn't assume OP can. And I myself is doing research in that direction. So can you talk a little bit about how the Bitcoin,

staking works like right now. So if somebody says, hey, I have some Bitcoin and I want to, you know, basically deposit this in Babylon and stake the Bitcoin. What actually happens on technically on the Bitcoin chain?

Yeah, so very importantly, Bitcoin staking is a completely native Bitcoin use case. So it's direct interaction with the Bitcoin chain. So what happens here is that if you're one Bitcoin, your one Bitcoin is held in a so-called UTXO, and UTXO, okay? So now you create another UTXO, yourself, and you send that Bitcoin to that UTXO, still under

your own custodian. Now, but that UTXO has a few special spending conditions, spending conditions. The one is that it's a time lock, it's a time lock, that locks your Bitcoin and you cannot withdraw it until a certain time or until you send another request, which is like in cosmos chains, an unbonding request. So there's a time lock mechanism. Two is that there is a slashing mechanism. And this is the crucial part of how this Bitcoin can provide security to a, say, cosmos chain or a row-up. Is that this slashing condition is activated with a social with a what we call finale provider, or in

more standard proof of stick language, a validator, this valid is in charge of securing a proof of state chain or a row-up. And the contract here is that as low as this validator's honest, this slashing condition is never activated. Never activated.

However, if it does something bad, then this slashing condition can be activated. And your fraction of your one Bitcoin can be spent through the slashing and sent to a burn address. So this is roughly how it works. So you as a sticker has to pick one particular finality provider that you stick to, and it could be yourself. Can you tell us a little bit about, so now someone is staking the Bitcoin and then we have these Bitcoin secured networks, right?

These are some networks that now are relying on this Bitcoin security. How do the Bitcoin secure networks work? So just to clarify, we are right now in phase one of our main net launch. The Babylon Protocol is launched in phase one. So in phase one, only staking, only locking of the stick occurs, and there are no Bitcoin security network yet. or in phase two and three, we'll launch a more, we launch big con secure networks. Now, so example of such network could be, I don't know, osmosis or a row-up,

like this this rope called corn that we work with. So how does it work? Okay. So there will be, right now on our network, there are 200, around 200 finality providers, okay? So Fagment and P2P, et cetera, a Cosmos station, et cetera. These are finale providers.

And now when these BSNs, Bitcoin secure networks are launched, some of these finesse providers will choose to secure these networks. Okay? And to secure these networks, they will sign some special signatures to certify these blocks as Bitcoin security. And their job is to make sure they sign only one block at every height to make sure that you have a linear blockchain going. And so the slashing capability is to make sure that they do that.

In other words, they cannot double sign two blocks to try to fork the chain. And this is where the security comes from. So when a client in one of these networks sees many these Finale provider signature, then they know, whoa, this block is really super secure. And I can trust this block and I can trust the transactions in these blocks. And then let's say if we take the osmosis example, I mean, Osmosis has its own staking token, all small, and it has a significant number of validators already.

if that now becomes a Bitcoin secured network, then how does that interact with the existing security system that's already there? Yeah, so that's a very good question. That's right. Osmosis are really validers signing the blocks. So why do we need these Bitcoin secured signatures? Well, so you can think of a good analogy,

a US analogy would be like House and the Senate. So legislation are voted by both the House and the Senate, very American, sorry, very American example, but I do live in the U.S. So the same similar system would be happening in the osmosis case. So the osmosis validators will sign on the block as the first committee. And then on top of that, there's another committee which are these Bitcoin secure signatures, because the finale provided signatures,

that signs again on top of this block. So a client will check both the osmosis signatures and the finale provided signatures and see that, okay, both committee have signed. And so this block is now getting, you can think of additional security. So think about it, I don't know. Osmosis security could be, say, 300 million worth of osmosis' sticks.

I don't know what exact number today, but example, 300 million. On top of that, you have another, I don't know, one billion of Bitcoin-stakes security. Well, then you have a total of 1.3 billion worth of security on top of osmosis. Much stronger level of security than just the osmosis stick by itself. What's the utility? I mean, like, you know, for chains with, like, arguably good security like osmosis or the cosmos hub that are secured by like large and on some stake, what's the tangible benefit for users to have that additional layer of security, you know, purely on the security side.

I understand that there's like implications here in terms of having the ability to bridge over liquidity, et cetera. How does that play out? Oh, but the breach over liquidity is the key to the story. So first of all, the security should be proportional to the amount of liquidity that you maintain on the chain, right? So you want to have a lot of liquidity, a lot of asset on the chain, then you should have corresponding amount of security to protect that asset. So therefore, the value for osmosis of increasing the security is precisely to absorb or to attract more liquidity, to attract more liquidity into the tax, etc. Now, actually, there's a very tangible way. So that sounds like very abstract, right?

So how do you get most, the fact that you have more security doesn't mean you have more liquidity is necessary but not sufficient. However, in the case of Bitcoin sticking, there's actually a very tangible way of these chains getting liquidity. And that liquidity is precisely because of a very recent development, which is all these liquid sticking tokens on top of Babylon. So Babylon provides the sticking layer, but what happened in the past six months is that several rather prominent projects

have built liquid-staking protocol that is they stick on Babylon but at the same time they mint an asset. So now that mint asset could appear on the osmosis chain. So now osmosis is getting both security from Bitcoin sticking and also liquidity from the LST. And now you get both liquidity and security

and now they proportion to each other, and that would increase the economic activity of osmosis. Yeah, I agree. I think that's really where you have a very big unlock, right? Because I think if you can tell a chain like osmosis, look, you're going to get additional Bitcoin security, but also Bitcoin liquidity, right? And now, you know, in addition to whatever,

a billion dollars worth of Bitcoin security, you get like maybe a few hundred million or something in, you know, Bitcoin liquidity. and you can have like really liquid Bitcoin markets on there. I think that's where it starts to become like really attractive. Is this the case then because the security can be used on on different chains at the same time, right? But the liquidity that can only go to one place. Is that right?

Correct. Liquidity can only go to one place. security can be shared and that's really up to the users. So the user takes the one Bitcoin right in the example of Brian that you had, one Bitcoin, the user can say, okay, I want this one Bitcoin to only secure osmosis.

Or it can take this one Bitcoin and do what we call multi-staking or restaking, which is to stick multiple chains. That's an option entirely from the Stakers perspective. The liquidity is directly to one particular check. Correct.

So when the user says, hey, I want to secure multiple chains and basically restake the Bitcoin or multi-stake the Bitcoin, then would this also involve some changes on the Bitcoin side, like some additional transactions, or that happens purely through the, activity of the finality provider that the user stakes the Bitcoin with? Everything should be reflected on the Bitcoin chain, right? Because the Bitcoin chain is the final aperture of what happens to the stick, because the stick always sits on the Bitcoin

chain. Now, if you remember, I said that the sticking has a thing called spending condition, for slashing. Okay? So if you have, if you decide to stick only on osmosis, then you will only have one slashing condition associated with the finality provider on osmosis. But if you decide to stick on two chains,

osmoses and, I don't know, Cosmos hub, then you will have two slashing conditions, one associate with a finality provider on osmosis, and one associated with a finality provider on Cosmos hub. So that's how it's reflected on Bitcoin through having more slashing conditions. And in the scenario of a slashing actually happening, is the Bitcoin basically burnt? Yes. Not the entire Bitcoin, but a fraction of the Bitcoin.

This is where I'm not clear. Maybe you can elaborate here. So as a staker, so if, I'm holding Bitcoin and I want to stake my Bitcoin with Babylon, the Bitcoin, you said earlier that there's no requirement to send that Bitcoin to a third-party address. So because it's self-custodial. How would those slashing conditions be applied then? It's self-custodial, but the slashing condition is associated with the finality provider that you chose.

Okay. So maybe think of a typical example in Cosmo's chain. There's a notion called delegation, right? You delegate your stick to a particular validator like, I don't know, Cosmo Station. So in some sense, the staker is trusting Cosmo Station to do the right thing. It would not double spend and get the stickers Bitcoin, or not Bitcoin in that case, maybe Osmo, stick, a slash. So the same delegation is happening here in our design for Bitcoin staking as well.

And of course, you can always run your own financial provider if you don't trust anyone else to do the right job. And indeed, there are stickers that are running their own family provider right now because they have so much stake, they don't worry about and trust anyone else. They run an owner provider. Right. Okay. So basically you're saying is that the staking rewards are off for slashing. with not the original, like, collateral or, like, delegated tokens? No, no, no, no, no.

That's not true. That's not true. So, okay, let me make sure. The contract, okay, the sticking contract is that your stick is safe, except only the condition, except only the condition, that the finale providing you delegate to double sides. Okay, that's the contract. If it double size, you will lose a fraction of your stick.

And that fraction is a parameter, also part of the contract. So that's the promise. That's the collateralization of your capital. So let's talk a little bit about the Babylon chain, right? Because Babylon also is launching a cosmos chain, the Babylon chain, which is going to have its own, staking token. What's the relationship between the Bitcoin staking and the Babylon chain and then these Bitcoin secured networks? Okay. So, yeah, so the Babylon chain is playing a

multiple rows here. So first of all, Babylon chain will be the first Bitcoin secure network. It's like our dog food, Bitcoin secure network that we build ourselves. So that would be launched in phase two of the project after phase one, the current phase one is finished. So that's the number one row. Now, the second row is when all the BSNs come online, which is our phase three, then the Bitcoin secure, then the Babylon chain will act as a coordination layer, coordination layer between Bitcoin and all these other BSNs. because if you think about it,

our system is actually the whole broadband protocol is a interchained system because it involves multiple blockchains. The stick is sitting on Bitcoin, but the vanilla providers are voting on the BSS. So to make this whole system works, it requires a coordination between Bitcoin and each of these other chains.

And so the Babylon chain serves as a middle layer, a coordination layer, to make that coordination work efficiently. So to give an example, you mentioned timestamping earlier, time stamping earlier. And it turns out that for this protocol to work, we need also time stamping between Bitcoin and each of the BSNs. And the role of the Babylon chain, in this case, is to help with this timestamping. Because Babylon itself timestamps to Bitcoin. And this timestamping is very important because you need to synchronize the timing between

a BSN and Bitcoin so that, for example, when you unlock, we unbond a stake, then the Bitcoin, the vanilla provider voting, power, can be removed immediately on the BSN. So a time coordination is very important in this interchained system. Right. And then the nice thing is that because the Babylon chain is a proof of stake chain, so it can have very fast blocks. So you can have this time stamping kind of in sync with the speed of all of these chains

for Babylon chain. And then that basically sort of, you know, aggregates and timestamps that to Bitcoin sort of on the, like running a little bit behind but, you know, still providing like, you know, high degree of security. Exactly. The aggregation that you mentioned is one of the most important thing.

Because imagine a world where there are hundreds of these BSNs. If each of these chains have to directly build the old infrastructure to timestamp to Bitcoin, it's just not a scalable solution. to have so many time stamps on the Bitcoin chain. And so Babylon chain serves as this aggregation row so that you only need one time stamp,

even though you have hundreds of BSNs. These liquid staking tokens, do you imagine that in the future they will mostly also be issued on the Babylon chain? Or could they be issued in many different places? Yeah. So, yes, we... We're hoping to encourage folks to issue their LSTs on the Babylon chain first and then move

that liquidity to other chains as needed. So that would be good. So we would like to sort of build our next generation of technology, it would be some infrastructure to support to do that in a trust-minimizing way. So like taking a step back here, there's been, I find this like quite surprising actually, but when I was at Proof-FStakes, I'm sick and summit just recently, and there were people there were talking about Bitcoin moving to proof of stake.

And like for someone who's been in the space for so long, I think like maybe to a lot of people, that just seems like a very, you know, unlikely sort of scenario. But, you know, at this point, how do you think about that idea and like, where's the likelihood that in some time, what would that look like? Bitcoin moving to proof of stake.

Yeah, so just to clarify, right, our project, Babelod, is not advocating to turn Bitcoin into a proof of stake chain. Our goal right now is to take this Bitcoin asset to make it as useful as we can. And the use case we're focusing on is used as a staking asset to boostrap or to improve the liquidity and security

of other blockchain. So that's the focus of the project. Now, in the distant future, if it happens that this idea is so successful, so much other blockchain, so much of the entire crypto ecosystem is built on this Bitcoin's decade, then at some point, Bitcoiners may say, hey, maybe we can also use this security to secure ourselves, to improve the Bitcoin security. If that day happens, then it happens. If it doesn't happen, it doesn't happen.

So one thing interesting about the evolution of crypto is that Bitcoiners often said that all other blockchains are test nets for Bitcoin. So what does that mean? That means that, hey, if you have a new concept, you want to test it on other blockchains before you bring it back to Bitcoin. And in some sense, Bitcoin sticking is kind of an example of that thinking, right?

Because, hey, sticking has been proved to be rather successful in these proof-of-stick blockchains. Now we're bringing part of that idea back to Bitcoin and say, hey, why don't we use Bitcoin also as a sticking asset for these other blockchains? So in some sense, we go in that direction. And maybe at one point, people would think, whoa, this proof-of-stick idea of using Bitcoin is so powerful that maybe we can use Bitcoin. that maybe we can use Bitcoin the asset to increase the security of Bitcoin chain itself. That's a long way off, though, I think. Yeah, I feel like it's a long way off as well,

if it were to happen. But, yeah, I find it like sort of interesting that people are actually bringing this up as a possibility where, you know, if you had said this, maybe three, four years ago, it would have been no one was ever considering Bitcoin to move to proof a stake. and now it's actually actually being talked about.

I think one of the things that's interesting here about Babylon and generally Bitcoin L2s is that it allows Bitcoin liquidity to move into DFI and be better utilized in DFI. But there's a whole array of chains that also would fall in this category. Many of the top 20 chains, chains like like coin, XRP, Cardano, Dogecoin, these so-called dinosaur chains, right, where a lot of the liquidity is being held in wallets or on sexes and not really being utilized in D5 very much. Now, over the last couple of months, there's been more and more conversation about allowing that liquidity to more easily flow into

D5 protocols. What is your take on expanding, you know, Bitcoin liquids, Bitcoin restaking to other chains, perhaps other proof of work chains, you know, some script chains, or other chains like the ones I mentioned, so that we can grow liquidity in defy using the liquidity that's already on chain. Yeah, I mean, I could see the concept that the protocol that we came up with can be adapted

to apply on other particular proof of work chains which used similar scripting language as Bitcoin. Yes, I'm quite sure they are projects. probably working on that right now. Our focus is entirely on Bitcoin. Bitcoin. Bitcoin is a huge enough asset that if we get 1% of Bitcoin, there's already quite significant accomplishment.

So we just laser focus on Bitcoin. So we talked earlier a little bit about some of the efforts to have some upgrades for covenants, OPECAT, more expressivity. Now, the way you guys are building, right, you're not relying on that, but you're building basically on Bitcoin as it is. But if some of those things were to happen,

would this change Babylon or would this kind of bring, I don't know, some new features or is it something where you kind of feel like, no, we can make do with the way it is right now and it doesn't really matter? Yeah, so our technology is entirely independent of soft fork, right? So that was our philosophy I mentioned. So we do not assume soft fork, and our technology doesn't assume that. Now, if there is a soft fork like passing some kind of covenants, opi cat, or something similar, then, yes, that would make us to be able to do more things.

and in a cheaper way. So right now, a lot of the ideas around BitVM is basically to get around this confidence issue. The consequence, though, is that there are some costs associated with it. So the transaction fees tends to be a little bit high, and so that could be reduced.

So I think, to me, is mainly a question of efficiency. that you can do it at a lower cost. You can do more things at a lower cost. But for us, right now, the Bitcoin sticking core primitive is already very low cost and without these softwork. So the Babylon ecosystem has really grown tremendously. I think over the past year or so, there's a lot of projects. You mentioned liquid staking assets are being built on top of Babylon,

a lot of things happening. what are the most interesting and exciting things being built? Yeah, so a lot of the innovations right now is really try to figure out how to sort of couple or add liquidity to the base layer of staking. And I think that's sort of where we try to provide a lot of support as the base staking protocol. So what are the timelines here?

You mentioned, you know, phase one, phase two, phase three. Yeah, how do you see, on what time frame do you see those rolling out? Yeah, we're shooting for, right now we're in phase one. We have opened the cap three times, cap one, cap two, cap three. And right now it's closed. We have about 57,000 billion. Bitcoin, $57,000 Bitcoin stake on the Babylon Protocol. And phase two, we are shooting for roughly end of Q1, begin of Q2 timeframe to launch the Babylon chain.

That's our phase two. And in phase three, which hopefully will happen maybe a quarter after that is we will have a bunch of initial cohort of BSN's Bitcoin Secure Networks to complete the entire picture. So that's the face launch. Cool. Well, thank you so much for coming on, David. It's really great to, you know, to hear your overview. And it's super exciting.

I think as, you know, as a long-term Bitcoin holder who's helped Bitcoin for a long time and always been like, oh, it would be great to do something with it. I think it's super exciting. And of course, as someone, you know, Sebastian as well as me, you know, they deep in the cosmos ecosystem. It's amazing that, you know, those two things come together, and we've now seen such a vibrant ecosystem emerging around Babylon. So super excited to see how these phases roll out and, yeah, how it's going to play out in the next years.

So thank you so much for your work and thanks so much for joining us today. Great being here. Great conversation, Brian, the Sebastian. Thank you very much. Thank you.