A brief discussion on staking and re-pledge in BTC ecosystem

As we all know, Staking and Restaking in the ETH ecosystem have always been popular tracks, contributing the vast majority of DeFi’s TVL. Because BTC lacks smart contract functions, Staking for BTC has encountered technical bottlenecks. Babylon first solved this problem and introduced Staking into the BTC ecosystem. Therefore, various BTC restaking explorations were generated based on this technology.

To put it simply, Babylon (@babylon_chain) has a total of three products, staking, restaking and babylon chain.

BTC Staking

EigenLayer has realized the evolution of ETH staking from 1 to 10: ETH itself can be pledged, and EigenLayer allows it to be pledged again. Babylon needs to do one more step than EigenLayer to go from 0 to 1: make the non-pledgeable Bitcoin first become pledgeable, and then make Bitcoin and pledge again, to achieve 1-10.

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

Staking and Unstaking can be achieved through the hash time lock function. The Bitcoin script language allows time locks, which allows users to customize a locking period during which the Bitcoin (UTXO) cannot be transferred. For example, if a Bitcoin is given a time lock of 1,000 Bitcoin blocks, then the Bitcoin will be locked for about a week, thereby achieving the lock required in the pledge.

Staking penalties can be implemented through Schnorr signatures. The Schnorr signature algorithm supported by Bitcoin has an interesting property under a specific construction. If the signature holder signs two conflicting messages at the same time, anyone who sees the two sets of signatures can reversely solve the problem. Signing private key. Babylon takes advantage of this feature to construct a signature for Bitcoin holders that can be used to lock the pledged Bitcoins. After locking, Bitcoin holders can use the signature to participate in the consensus of the PoS system. If he attacks the PoS system and votes randomly when participating in the consensus, his Schnorr private key can be decrypted by anyone, causing his pledged Bitcoins to be forfeited.

During the entire process of staking, the Bitcoin pledger did not hand over the Bitcoin to anyone, nor did he hand over the private key to unlock the pledge to anyone, so there is no trust at all.

BTC Restaking

By recording the hash value of some key data of the PoS blockchain (such as transaction hashes, important decisions or status updates) to the Bitcoin blockchain, " Checkpoint" (also a variation of inscription). Babylon can provide tamper-proof timestamp proof for this data, which is equivalent to regularly anchoring snapshots of the PoS chain state to the Bitcoin blockchain.

The main participants in PoS network staking include currency holders, verifier nodes, wallets, etc. When the Bitcoin staking protocol was introduced, currency holders expanded to Bitcoin holders, and the verification nodes could choose to run verification nodes or run a finality provider supported by Bitcoin staking. The wallet side needed to have no Seam supports multiple currencies, including Bitcoin and PoS native tokens.

DA node, blockchain BP node, is a typical application scenario of BTC Restaking.

Balylon Chain

In order to use the restaking function, babylon first made a chain by itself using cosmos sdk, and applied the pledged BTC to the BP node 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.

Because currently babylon only completes the BTC staking function, and restaking only implements the public chain based on Cosmos, this provides opportunities for other projects.

Chakra

Chakra (@ChakraChain) also has a restaking function based on babylon. The only difference is that Chakra uses the starkware technology stack instead of cosmos.

1, use babylon to pledge btc, generate staking event

2, use chakra (starkware) to generate ZKP for staking event

3, Staking ZKP is verified by the node, thus providing Security protection,

4, use starkware sdk to make a chain.

Lorenzo Protocol

Lorenzo (@LorenzoProtocol) also does restaking based on babylon staking, and also uses cosmos SDK to build a chain, but the innovation lies in the financial aspect. Divide the stBTC generated by pledge into two and generate two tokens

LPT (Liquid Principal Tokens): Tokens equivalent to stBTC

YAT (Yield Accruing Tokens): Interest generation Coin

This innovative approach allows the Lorenzo protocol to separate principal investments from returns, providing users with flexibility in managing risks and returns. This model can appeal to a variety of stakeholders, including those who want trading returns independent of principal, or those seeking to accumulate specific types of assets as a strategy.

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