Babylon chain closes $18m support for Bitcoin stock

Polychain Capital and Hack VC led an $18 million Series A funding round for Babylon Chain, a Bitcoin (BTC) staking protocol that connects the decentralized finance (DeFi) ecosystem to the Bitcoin blockchain.

According to the December 7 announcement, the funds will be used to support the development of Babylon's Bitcoin Staking Protocol, which will allow proof-of-stake (PoS) networks to stake BTC, adding liquidity and security to emerging chains.

For context, a PoS chain is a form of blockchain that relies on participants to verify transactions. To become a validator and create new blocks, a participant must carry the chain's native token. The security and integrity of the PoS chain depends on the amount of tokens held. Bitcoin, however, uses another method, known as proof-of-work (PoW), where miners solve complex mathematical problems to confirm transactions.

Babylon wants the two worlds to be one. The startup introduced Bitcoin staking Minimum Viable Product (MVP) in October, which will help reduce inflation on PoS chains while strengthening the security of emerging chains that rely on Bitcoin to attract capital.

According to the start-up Lite Paper, the biggest challenge is to “crack down on all security breaches without smart contracts on the Bitcoin chain. To solve this problem, the protocol claims to use accountable proofs, finality widgets, Bitcoin emulation, and timestamps. “Our architecture is modular, and can be used across all PoS consensus protocols. No soft or hard Bitcoin fork is required to implement our Bitcoin staking protocol,” Babylon wrote.

Staking could pave the way for more developers to build solutions on the Bitcoin network, which is one of the challenges the original blockchain faced. As the first and major cryptocurrency in the world, Bitcoin has a capitalization of $847.8 billion at the time of writing. Glassnode's report shows that 66 percent of the circulating supply has been dormant for at least a year.

“Babylon will not only open up the largest blockchain asset, but also make Bitcoin-backed security services (such as data access services) available to the wider blockchain ecosystem,” said Alex Pak of HackVC.

Additional investors in the round include Framework Ventures, Polygon Ventures, Castle Island Ventures, OKX Ventures, Finality Capital, Breyer Capital, Symbolic Capital and IOSG Ventures.

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