January 14, 2025 • 49 mins
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 background
- The evolution of Babylon
- The Bitcoin Renaissance
- Technical challenges of implementing Bitcoin staking
- The OP_CAT upgrade
- Babylon’s Bitcoin staking & Bitcoin-secured networks
- Bridging liquidity & LSTs
- Securing multiple chains and slashing
- Babylon chain - aggregating Bitcoin-secured networks
- Could Bitcoin become a POS chain?
- Babylon upgradeability
Episode links:
Sponsors:
- 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.io
- Chorus 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.one
This episode is hosted by Brian Fabian Crain & Sebastien Couture.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
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
(00:23):
Bitcoin sticking. 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 software. Oh, but the bridge over
liquidity is the key to the story.
Welcome to Epicenter, the show which talks about technologies,
projects and people driving decentralization and the global
(00:46):
boxing revolution. So my name is Brian Crane and
I'm here with Sebastian Couture course Epicenter and we're here
today with David say, who's a professor at Sanford and he's
also the founder of Babylon. Babylon is, you know, very
interesting project that's usingBitcoin security and Bitcoin
(01:09):
staking to basically secure additional networks and
services. And that's gotten a lot of
fraction over the last year. So really excited to have that
David on today. And just before we get in with
David, a few words from our sponsors.
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(01:31):
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(01:55):
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Learn more at Chorus .1 and start staking today.
This episode is proudly brought to you by Gnosis, a collective
dedicated to advancing a decentralized future.
Gnosis leads innovation with Circles, Gnosis Pay and Metri
reshaping open banking and money.
(02:15):
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(02:37):
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(03:00):
David, thanks so much for joining us today.
It's a pleasure to have you on. Great to be here, Brian.
The question we'd love to start this show with is just what's
your crypto journey? How did you get it first?
Interested in crypto? Yeah, so, so my background is a
(03:20):
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 1,000,000 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
(03:41):
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
(04:01):
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 exclusivelyto research in crypto.
And I'm the at this point, I'm still the only research group at
Stanford exclusively focused on crypto research.
(04:23):
Crypto as in blockchain research.
Yes. Oh, that's interesting.
Yeah, yeah, 'cause I mean, Stanford has a long history,
right, with blockchain research.I know there's like Dan Bonet, I
think who is early on and I meana lot of things that came out of
Stanford know that's kind of blockchain related.
Yes, correct. Dan Bonet is of course one of
(04:45):
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. OK.
(05:07):
And then how? 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 hasentirely shifted the energy into
(05:28):
proof of stick networks, which kind of left Bitcoin in the dust
in terms of technology development.
However, Bitcoin remains a very valuable asset at this to this
day is 50% of the crypto market,more than 50% of the crypto
market. And it's security is
unparalleled compared to any other block chains.
(05:50):
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 stakeworld, 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
(06:12):
share Bitcoin security with proof of stake networks.
And we came up this concept of Bitcoin sticking, which is to
convert this one point, this point, I don't know, 1.51.61.7
trillion asset to thinkable asset.
And that's where Babylon arise. So I was in 2017 right as COO of
(06:36):
Tiananmen to the company that started the Cosmos ecosystem.
And I remember hearing about Babylon like some years ago.
And I think the way I remember it back then was the idea that
you could take these proof of stake block chains and they
could basically use Bitcoin as asort of time stamping server or
a time stamping place, right, where you put the sort of a hash
(07:00):
of the block block in there. So then if someone joins new
right, some, some proof of stakenetworks, they could sort of go
to the Bitcoin block chain and, and make sure that, you know,
it's really the authoritative chain that they're talking with
it. Was that the original idea or or
how did this kind of evolve? Yeah, Babylon has a interesting
(07:23):
story from in the point from point of view of evolution
technology. So the North star of Babylon has
always been sharing security from Bitcoin to approval of tech
networks. That's always been our focus
from day one. However, the means and the
technology and the protocol by which it does have gone through
an evolution. So the our original idea was
(07:43):
actually an idea of Nakamoto which is called merge mining.
So merge mining was an idea thatwas invented by Nakamoto in
around 20/10/2011 time frame. The idea is that Bitcoin miners
can simultaneously mine on another proof of war chain, and
we were using that idea to see if we can share security proof
(08:05):
of state networks. And then we turn 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 signaturesof the validators of the proof
of state networks onto Bitcoin so that you can have a time
(08:29):
stamp on these blocks and it gives you Bitcoin security.
However, time stamping has one drawback.
And the drawback is that becauseBitcoin is so slow, time
stamping is a very slow process.So this scale security is very
slow. And as you know, one of the
strength of proof of stick networks is that you get very
fast confirmation, a few secondsas opposed to Bitcoin which is
(08:54):
minutes or even hours. And so time stamping 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
(09:16):
asset now, you can keep the fastconfirmation of proof of state
networks, but strengthen it by increasing the amount of
capital, by adding the Bitcoin capital to provide a security.
Yeah, it's, it's really impressive to see Babylon's
evolution since those early dayswhen you guys were working on
time stamping. I, I did a podcast with Fisher
(09:37):
at, at Cosmo versus Medellin. And you had just announced this,
this Bitcoin time stamping mechanism that effectively as a
product would allow the alligators on proof of stake
networks to, to withdraw their capital faster, which was like a
really interesting idea in itself.
But then this proof, this, this Bitcoin staking idea emerge from
(09:59):
there. I wonder, you know, coming from
the research side of things and,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 the Bitcoin community, whichtypically is a little bit more
(10:19):
conservative and you know, from from my perspective, perhaps a
little bit more closed off to those ideas?
And how has that conversation changed over the last two years
as we've seen more and more Bitcoin L twos and more things
being built on top of Bitcoin? Yeah.
So when we started with this Bitcoin sticking idea, when we,
(10:41):
it was about 2023, about summer of 2023, that's when we came up
with the light paper for Bitcoinsticking and we start talking to
various communities and indeed the Bitcoin oh geez, supposed to
be quite conservative. However, I must say, overall we
(11:01):
find a reception pretty good andI think we're helped by a few
external forces. So if you remember earlier that
year or notes started or notes started and that was sort of a
mindset change to Bitcoiners that hey, you know what, Bitcoin
has more use cases than just Hodo and a payment system.
(11:26):
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 start emerging and so forth. And I think we kind of helped by
that broader movement of sort ofa new way of look at Bitcoin, we
call it Bitcoin Renaissance. And I think we became sort of a
(11:48):
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 you know,
(12:10):
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
(12:31):
far still like the and not a lotof upgrades have happened in
Bitcoin and it's still like verylimited.
So how did you guys manage to reenable that staking
functionality in Bitcoin? Yeah.
In fact, when we were discussingabout Bitcoin staking, one of
(12:54):
the early idea we had in fact was the through discussion with
Sunny Algo while you're talking about the Cosmos ecosystem.
So in fact, Sunny came to me andone of the you you remembered at
the Cosmo verse in Medellin, Sunny talked about mass
security, mass security, and that was the security between
Cosmos blockchains and E Denver,which was in 2024.
(13:17):
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 Sonia, I
remember, still remember very, very vividly was, hey, would it
be great if we can bridge Bitcoin to one of these Cosmos
(13:40):
chains like Babylon or Osmosis and then share security through
the mass security network? OK, So that was our sort of our
initial thought, but then we hada 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
(14:00):
secure Bitcoin bridge beyond just like a multi state bridge.
And, and then we went back to history and we noticed that in
21 five, there was an effort called drive chain, which is to
upgrade Bitcoin to enable such abridge to happen.
It's called draft. You can look back.
I think the first proposal came up around 2015 type frame.
(14:22):
But then I, I, I talked to Stanley.
I say, you know, Stanley, there's a problem here because
today we are 2024 and this proposal was issued in 2015 is
still not passed yet. So I don't think we should wait
for this drive change to happen because this is 9 years down the
road here. And who knows, we may have to
wait nine more years. And so we start thinking so, but
(14:46):
after this discussion was suddenly we, I came back to the
team, we start 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 sort of one of the key sort of new ideas this past year
(15:10):
from a research point of view isthat 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 fall. And so that has been sort of our
sort of drive to accomplish thatand for Bitcoin sticking, we
(15:34):
accomplished that. And you also you may also know
like new ideas like bit VM bridge for example, that is
another way of sort of trying toaccomplish that a different
functionality bridging in that case without soft fork.
How, how important is this, thisopcat upgrade and maybe for
(15:55):
perhaps would 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.
Opcat is basically concatenating2 strings together.
Sounds like something stupid, something very basic.
(16:17):
But yet Bitcoin scripting doesn't support that.
And in fact, it was in the original version of the Bitcoin
scripting language by Nakamoto, but it was deleted by Nakamoto
himself. And so the effort here is to
restore that that OP code. Now, one it, it can accomplish
many things, but one thing it can accomplish through some
(16:39):
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. There you you can put
restriction on where and how andhow much to spend to who.
(17:04):
That is not possible in the current Bitcoin scripting
language and enabling that turnsout to be rather powerful and it
could make many things much simpler and significantly
cheaper in terms of transaction fees.
In other words, when instead of writing a lot of code and having
to allot a huge script, you can get by with a much more compact
(17:25):
script, and that's what opcat enables.
Does it also enable multiplication?
Is is is it useful in the ability to do proofs on chain as
well? Yes.
So there's a lot of effort by Stocknet and a few and a few
(17:46):
teams to do so-called a ZK proofverification on chain using
OPCAT. And I'm not an 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 virtual stock is called Circle, circle
(18:10):
stock and that enables some multiplication, but I'm not an
expert in that area. So yeah.
OK, got it. I mean, are you, are you aware
of any of the current attacks and 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 by the Bitlare team to do a proof
(18:31):
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 whether the proof is a
correct proof on chain so that you can tell Bitcoin to spend
the money in the appropriate to the appropriate person.
(18:53):
Yeah, my statement was 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 that or 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
(19:13):
of the Bitcoin scripting language.
And so all these efforts are trying to do that.
So, 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't is passed, then you can implement more
efficient, say multiplication that you mentioned.
(19:35):
OK, so that's one effort, but that effort has a problem
because it assumes OP can't. And I don't think we're close to
seeing OPI cat pass at this moment.
And so the other effort is not assuming OP cat, but using an
approach called optimistic verification.
(19:58):
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 arechallenged by an external
challenger, then you do the verification.
(20:20):
And that verification you can docheaper because the challenger
can pinpoint a specific part of the computation or the
verification is like, hey, you know what, I think this part
you've cheated. Please show me the correct your
verification of this part and I can convince Bitcoin that you're
actually wrong. And so, and this is a bit like
(20:41):
the Abatron type ideas. And I think that approach is in
some sense more practical because it doesn't assume, oh,
we can and I'm I myself is doingresearch 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
(21:03):
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
sticking is a completely native Bitcoin use case.
(21:23):
So it's direct interaction with the Bitcoin chain.
So what happens here is that if you have one Bitcoin, your one
Bitcoin is held in a so-called UTXO.
UTXO, OK, so now you create another UTXO yourself and you
send that Bitcoin to that UTXO still under your own custodian
now, but that utexo has a few special spending conditions.
(21:47):
Spending conditions. The what for one is that is a
time lock, is 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 the Cosmos chains, an
unbounding request. So there's a time lock
mechanism. 2 is that there is a slashing mechanism and that's
(22:11):
this is the crucial part of how this Bitcoin can provide
security to a say Cosmos chain or a roll up is that this
slashing condition is activated with associate with a what we
call finale provider or in more standard proof of stick
(22:32):
language, a validator. This valid is in charge of
securing a proof of state chain or blow up and the contract here
is that as low as this value is honest, this slashing condition
is never activated. Never activated.
However, if it does something bad, then this slashing
(22:52):
condition can be activated and your fraction of your one
Bitcoin can be spent through theslashing and sent to a burn
address. So this is roughly how it works.
So you as a sticker has to pick one particular phonetic provider
that you stick to, and it could be yourself.
(23:14):
Can you tell us a little bit about, so now someone is staking
the Bitcoin and then we have these Bitcoin secured networks,
right? So these are some networks that
now are relying on this Bitcoin security.
How do the Bitcoin secured networks work?
(23:34):
So just to clarify, we are rightnow in phase one of our main net
launch, OK, the Babylon protocolis launched in Phase 1.
So in phase one only staking only locking of the stick occurs
and there are no Bitcoin secure network yet.
(23:55):
Oh, in phase two and three, we'll launch a more we'll launch
Bitcoin secure networks now. So so example of such networks
could be, I don't know, osmosis or roll up like this this this
world called corn that we work with.
So how does it work? OK, so there will be daily right
(24:21):
now on our network, there are 200 around 200 finale providers.
OK. So Figment and P2P etcetera or
Cosmo station etcetera, these are finale providers.
And now when these BSNS, Bitcoinsecure networks are launched,
some of these finale provider will choose to secure these
(24:45):
networks, OK. And to secure these networks,
they will sign some special signatures to certify these
blocks as Bitcoin secure. 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.
(25:07):
And so their slashing capabilityis to make sure that they do
that. In other words, they cannot
double sign two blocks to try tofork the chain.
And this is where the security comes from.
So in so when a client in one ofthese networks sees many these
(25:28):
finale providers signature, thenthey know, wow, 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, OSMO and it has, you
know, a significant number of validators already.
(25:51):
If that now becomes Bitcoin secure network, then like how
does that interact with the existing security system that
that's already there? Yeah.
So that's a very good question. That's right.
Osmosis already evaluated signing the blocks.
So why do we need these Bitcoin secured signatures?
(26:14):
Well, so you can think of a goodanalogy, AUS analogy would be
like a House and a Senate. OK, so legislation avoided by
both the House and the Senate. Very American, sorry, very
American example, but I do live in the US.
So so the same similar system would be happening in the
(26:35):
osmosis case. So the osmosis validators would
sign on the block as the first committee.
And then on top of that, there'sanother committee, which are
these Bitcoin secure signatures because the finale provided
signatures that signs a gain on top of this block.
So a client we'll check both theOsmosis interest and the finale
(27:00):
provider signatures and see that, OK, 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, I don't know what exact number
today, but example 300 million. On top of that you have another,
(27:24):
I don't know, 1 billion of Bitcoin stake 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 stake by itself.
What what's the utility? I mean like you know, for, for
chains with like arguably good security like Osmosis or the
(27:47):
Cosmos Hub that are secured by like large amounts of stake,
what's the tangible benefit for users to have that additional
layer of security, you know, purely on the security side, I,
you know, I understand that there is like implications here
in terms of having the ability to bridge over liquidity
etcetera. How does that play out?
Oh, but the bridge over liquidity is the key to the
(28:09):
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 thechain, then you should have
corresponding amount of securityto protect that asset.
So therefore the value of for osmosis of increasing the
(28:32):
security is precisely to absorb or to attract more liquidity, to
attract more liquidity into the tax etcetera.
Now actually there's a very tangible way.
So this sounds like very abstract, right?
So how do you get more? You get the fact that you have
more security doesn't mean you have more liquidity is a
necessary, but not sufficient. However, in the case of Bitcoin
(28:55):
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 ofBabila.
So Babylon provides the stickinglayer.
But what happened in the past six months is that several
(29:18):
rather prominent projects have built liquid sticking 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
(29:41):
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, 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
(30:02):
Bitcoin liquidity, right? And now, you know, in addition
to whatever a billion dollars worth of Bitcoin security, you
get like as maybe a few 100 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 attractiveis, is this the case then?
(30:25):
Because the security can be usedon on different chains at the
same time, right? But the liquidity that can only
go to one place, is that right or?
Correct. Liquidity can only go to one
place. Security can be shared and
(30:47):
that's really up to the users. So the user takes the one
Bitcoin, right. In the example, Brian that you
had one Bitcoin, the user can say OK, I want this one Bitcoin
to only secure osmosis or it cantake this one Bitcoin and do
what we call multi sticking or restaking, which is to stick
multiple chains. That's an option entirely from
(31:10):
the stakers perfect perspective.The liquidity is directed to one
particular chain, correct? So when the user says hey I want
to secure multiple chains and and basically restake the
Bitcoin or or stake or multi stake the Bitcoin, then would
(31:30):
this also involve some changes on the Bitcoin side like some
additional transactions or if that happens purely through the
activity of the finality provider that the user states
the Bitcoin with? Everything should, everything
(31:53):
should be reflected on the Bitcoin chain, right?
Because the Bitcoin chain is thefinal 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.
(32:15):
OK. So if you have, if you decide to
stick only on Osmosis, then you would only have one slashing
condition associated with the finale provider on Osmosis.
But if you decide to stick on two chains, Osmosis and I don't
know Cosmos Hub, then you will have two slashing conditions, 1
(32:36):
associate with a Fernando provider on Osmosis and one
associate with a Fernando 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?
(32:58):
Burnt, yes. Not the entire Bitcoin, but a
fraction of the Bitcoin. This is this is where I'm I'm
not clear. Maybe you can elaborate here.
So as a as a staker, So if I'm holding Bitcoin and I want to
stake my Bitcoin with Babylon the Bitcoin, you you said
(33:19):
earlier that there's no requirement to send that Bitcoin
to a third party address. So because it's it's self
custodial, how would those slashing conditions be applied
then? It's self custodial, but the
slashing condition is associatedwith the finale provider that
you chose. OK, so maybe think of a typical
(33:44):
example. In Cosmos Chain, there's a
notion called delegation, right?You delegate your stick to a
particular validator like you know, Cosmo station.
So in some sense the staker is trusting Cosmo station to do the
right thing. It would not double spend and
(34:05):
get the stickers Bitcoin or not Bitcoin in that case, that may
be Osmo staked a slash. So the same delegation is
happening here in our design forBitcoin sticking as well.
And of course, you can always run your own phonetic provider
if you don't trust anyone else to do the right job.
And indeed, there are stickers that are running their own
(34:26):
phonetic provider right now because they have so much stake.
They don't want anyone and trustanyone else.
They run for their provider. Right.
OK, so basically what you're saying is that the staking
rewards are off for slashing butnot the original like collateral
or like delegated tokens? No, no, no, no, no, no, that's
(34:47):
not true. That's not true.
So, OK, let me let me let me make sure the contract, OK, the
sticking contract is that your stick is safe except only the
condition. Excellent.
In the condition that the finaleproviding you delegate to double
(35:07):
sides. OK.
That's the contract. You have a double size, you will
lose a fraction of just 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 aboutthe Babylon chain, right?
(35:29):
Because Babylon also is launching a Cosmos chain, the
Babylon chain, which is going tohave its own staking token.
What's the relationship between your the Bitcoin staking and the
Babylon chain and then these Bitcoin secured networks?
(35:49):
OK. So yeah, so the Babylon Chain is
playing a multiple roles here. So first of all, Babylon Chain
will be the first Bitcoin securenetwork.
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
(36:12):
Phase 1 is finished. So that's the one number one
row. Now the second row is when all
the BSNS come online, which is our phase 3.
Then the Bitcoin secure, then the Babylon chain will act as a
coordination layer, coordinationlayer between Bitcoin and all
(36:36):
these other BSNS. Because if you think about it,
our system is actually the wholeBradburn protocol is a
interchange system because it involves multiple block chains.
The stick is sitting on Bitcoin,but the finance providers are
(36:57):
voting on the BSNS. 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 example, you
(37:20):
mentioned time stamping 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
(37:42):
with this time stamping because Babylon itself time stamps to
Bitcoin. And this time stamping is very
important because you need to synchronize the timing between a
BSN and Bitcoin so that for example, when you unlock we
unborn a stick, then the Bitcoin, the valid, the
(38:03):
financial provider voting power can be removed immediately on
the BSN. So a time coordination is very
important in this interchange system.
Right. And then the nice thing is that
because the Babylon chain is a proof of safe chain, so it can
(38:23):
have very fast blocks. So you can have this time
stamping kind of, you know In Sync with the speed of all of
these chains for Babylon chain. And then that basically sort of,
you know, aggregates and time stamps that to Bitcoin sort of
on the like running a little bitbehind, but you know, still
(38:45):
providing like, you know, high, high degree of security.
Exactly, the aggregation that you mentioned is the most
important, one of the most important thing because imagine
a world where there are hundredsof these BSNS.
If each of these chains have thedirectly build their own
infrastructure, the time stamp to Bitcoin, it's just not a
scalable solution to have so many time stamps on the Bitcoin
(39:08):
chain. And so Babylon chain serves as
this aggregation row so that youonly 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
(39:30):
they be issued in many differentplaces?
Yeah. So yes, we are 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 would be some
(39:53):
infrastructure to support to do that in a trust minimizing way.
So like taking a step back here,there's been I, I find this like
quite, quite surprising actually, But you know, when I
was at. Proof of stakes second summit
just recently. And there were there were people
(40:14):
there 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 ofscenario.
But you know, at this point, how, how do you think about that
idea? And like, what is the likelihood
that in some time, what would that look like, you know,
(40:37):
Bitcoin moving to proof of stake?
Yeah. So just to clarify, right, our
research, our, our project Babylon is not advocating to
turn Bitcoin into approval stakechain.
Our, our, our goal right now is to take this Bitcoin asset to
(40:57):
make it as useful as we can. And the use case we're focusing
on is used as a sticking asset to bootstrap or to improve the
liquidity and security of other block chains.
So that's the that's the focus of the project.
Now, in the distant future, if it happens that this idea is so,
(41:19):
so, so successful, so much otherblock chains, so much of the
entire crypto ecosystem is building on this Bitcoin
sticking, then at some point Bitcoiners may say, hey, maybe
we can also use the security to secure ourselves to improve the
Bitcoin security. If that day happens, then it
(41:40):
happens. If it doesn't happen, it doesn't
happen. So one thing, one thing
interesting about the evolution of crypto is that Bitcoiners
often said that all other block chains are test Nets for
Bitcoin. OK, So what does that mean?
That means that hey, if you havea new concept, you want to test
(42:01):
it on other block chains before you bring it back to Bitcoin.
And in some sense, Bitcoin sticking is kind of a 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
(42:23):
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 the asset to increase the security of Bitcoin
chain itself. That's a long way off though, I
think. Yeah, I, I, I feel like it's a
(42:45):
long way off as well if, if it were to happen.
But yeah, I find it like sort ofinteresting that people are
actually bringing this up as like as a possibility where, you
know, if you would have said this maybe 3-4 years ago, it
would have been no, no one was ever considering Bitcoin to move
to prove a stake. And now it's actually actually
being talked about. I think like one of the things
(43:08):
that's interesting here about Babylon and like generally
Bitcoin L twos is that it, it allows Bitcoin liquidity to move
into D5 and be better utilized in D5.
Well, there's a whole array of chains that also would fall in
this category. Many of the top 20 chains,
(43:29):
chains like Litecoin, XRP, Cardano, Dogecoin, these 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
(43:52):
that liquidity to more easily flow into D5 protocols.
What is your take on expanding, you know, Bitcoin liquid Bitcoin
re staking to other chains, perhaps other proof of work
chains, you know some script chains or or other chains like
the ones I mentioned so that we can grow liquidity and defy
(44:14):
using the liquidity that's already on chain?
Yeah. I mean, I could see the concept
that what it's the pro code thatwe came up with can be adapted
to applied on other particular proof of work chains which use
similar scripting language as Bitcoin.
Yes, I'm quite sure there are projects probably working on
(44:36):
that. Right now our focus is entirely
on Bitcoin, Bitcoin. So Bitcoin is a huge enough
asset that if we increase, if weget 1% of Bitcoin, there's
already quite significant accomplishment.
So we just focus laser focus on Bitcoin.
(44:57):
So we talked earlier a little bit about, you know, some of the
efforts to have, you know, some upgrades for covenants more OP
cat, more exclusivity. Now the way you guys are
building, right, you're not relying on that, but you you're
building basically on Bitcoin asit is.
(45:17):
But if some of those things wereto happen, would this change
Babylon or would this kind of bring, I know, some new
features? Or is it something where you
kind of feel like, no, we can make do of the way it is right
now and it doesn't really matter?
Yeah. So our technology is entirely
(45:42):
independent of soft fork, right.So that was our philosophy I
mentioned. So we do not assume soft fork
and our technology does not assume that.
Now if there is a soft fork likepassing some kind of covenants
or we can't or something similar, then yes, that would
make us to be able to do more things and in a cheaper way.
(46:09):
So right now a lot of the ideas around bit VM is basically to
get around this covenants issue.The the consequence though is
that there are some costs associated with it.
So the transaction fees tends tobe a little bit high and so that
(46:31):
could be reduced. So I think to me it's 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 this software.
(46:51):
So the Babylon ecosystem is really, you know, grown
tremendously I think over the past year or so.
There's a lot of projects. You know, 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.
(47:12):
So a lot of the innovations right now is really try to
figure out how to sort of coupleor add liquidity to the base
layer of sticking. And I think that's sort of where
we try to provide a lot of support as the base staking
(47:34):
protocol. So what are the timelines here?
You mentioned, you know, phase one, phase two, phase three,
Yeah. How do you see?
I don't know. What time frame do you see those
rolling out? Yeah, we're shooting for right
(47:54):
now we're in phase one. We have opened the cap three
times, cap one, cap 2, cap 3 andright now it's closed.
We have about 57,000 Bitcoin, 57,000 Bitcoin staked on the
Babylon protocol and phase two we are shooting for roughly end
(48:20):
of Q1, begin of Q2 time frame tolaunch the Babylon chain.
That's our phase two. And in phase three which
hopefully will happen maybe 1/4 after that is we will have a
bunch of initial cohort of BSNS,Bitcoin secure networks to
(48:43):
complete the entire picture. So that's the face lodge.
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 as you know, as a
long term Bitcoin holder who's helped Bitcoin for a long time
(49:05):
and always been like, oh, it would be great to do something
with it. I think it's super exciting and
of course there's someone you know Sebastian as well as me,
you know, they deep in the cosmos ecosystem.
It's it's amazing that here are those two things come together
and we've now seen such a vibrant ecosystem emerging
around Babylon. So super excited to see how
(49:26):
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 is the best yet. Thank you very much.
Thank you.
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
(00:23):
Bitcoin sticking. 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 software. Oh, but the bridge over
liquidity is the key to the story.
Welcome to Epicenter, the show which talks about technologies,
projects and people driving decentralization and the global
(00:46):
boxing revolution. So my name is Brian Crane and
I'm here with Sebastian Couture course Epicenter and we're here
today with David say, who's a professor at Sanford and he's
also the founder of Babylon. Babylon is, you know, very
interesting project that's usingBitcoin security and Bitcoin
(01:09):
staking to basically secure additional networks and
services. And that's gotten a lot of
fraction over the last year. So really excited to have that
David on today. And just before we get in with
David, a few words from our sponsors.
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(03:00):
David, thanks so much for joining us today.
It's a pleasure to have you on. Great to be here, Brian.
The question we'd love to start this show with is just what's
your crypto journey? How did you get it first?
Interested in crypto? Yeah, so, so my background is a
(03:20):
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 1,000,000 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
(03:41):
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
(04:01):
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 exclusivelyto research in crypto.
And I'm the at this point, I'm still the only research group at
Stanford exclusively focused on crypto research.
(04:23):
Crypto as in blockchain research.
Yes. Oh, that's interesting.
Yeah, yeah, 'cause I mean, Stanford has a long history,
right, with blockchain research.I know there's like Dan Bonet, I
think who is early on and I meana lot of things that came out of
Stanford know that's kind of blockchain related.
Yes, correct. Dan Bonet is of course one of
(04:45):
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. OK.
(05:07):
And then how? 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 hasentirely shifted the energy into
(05:28):
proof of stick networks, which kind of left Bitcoin in the dust
in terms of technology development.
However, Bitcoin remains a very valuable asset at this to this
day is 50% of the crypto market,more than 50% of the crypto
market. And it's security is
unparalleled compared to any other block chains.
(05:50):
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 stakeworld, 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
(06:12):
share Bitcoin security with proof of stake networks.
And we came up this concept of Bitcoin sticking, which is to
convert this one point, this point, I don't know, 1.51.61.7
trillion asset to thinkable asset.
And that's where Babylon arise. So I was in 2017 right as COO of
(06:36):
Tiananmen to the company that started the Cosmos ecosystem.
And I remember hearing about Babylon like some years ago.
And I think the way I remember it back then was the idea that
you could take these proof of stake block chains and they
could basically use Bitcoin as asort of time stamping server or
a time stamping place, right, where you put the sort of a hash
(07:00):
of the block block in there. So then if someone joins new
right, some, some proof of stakenetworks, they could sort of go
to the Bitcoin block chain and, and make sure that, you know,
it's really the authoritative chain that they're talking with
it. Was that the original idea or or
how did this kind of evolve? Yeah, Babylon has a interesting
(07:23):
story from in the point from point of view of evolution
technology. So the North star of Babylon has
always been sharing security from Bitcoin to approval of tech
networks. That's always been our focus
from day one. However, the means and the
technology and the protocol by which it does have gone through
an evolution. So the our original idea was
(07:43):
actually an idea of Nakamoto which is called merge mining.
So merge mining was an idea thatwas invented by Nakamoto in
around 20/10/2011 time frame. The idea is that Bitcoin miners
can simultaneously mine on another proof of war chain, and
we were using that idea to see if we can share security proof
(08:05):
of state networks. And then we turn 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 signaturesof the validators of the proof
of state networks onto Bitcoin so that you can have a time
(08:29):
stamp on these blocks and it gives you Bitcoin security.
However, time stamping has one drawback.
And the drawback is that becauseBitcoin is so slow, time
stamping is a very slow process.So this scale security is very
slow. And as you know, one of the
strength of proof of stick networks is that you get very
fast confirmation, a few secondsas opposed to Bitcoin which is
(08:54):
minutes or even hours. And so time stamping 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
(09:16):
asset now, you can keep the fastconfirmation of proof of state
networks, but strengthen it by increasing the amount of
capital, by adding the Bitcoin capital to provide a security.
Yeah, it's, it's really impressive to see Babylon's
evolution since those early dayswhen you guys were working on
time stamping. I, I did a podcast with Fisher
(09:37):
at, at Cosmo versus Medellin. And you had just announced this,
this Bitcoin time stamping mechanism that effectively as a
product would allow the alligators on proof of stake
networks to, to withdraw their capital faster, which was like a
really interesting idea in itself.
But then this proof, this, this Bitcoin staking idea emerge from
(09:59):
there. I wonder, you know, coming from
the research side of things and,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 the Bitcoin community, whichtypically is a little bit more
(10:19):
conservative and you know, from from my perspective, perhaps a
little bit more closed off to those ideas?
And how has that conversation changed over the last two years
as we've seen more and more Bitcoin L twos and more things
being built on top of Bitcoin? Yeah.
So when we started with this Bitcoin sticking idea, when we,
(10:41):
it was about 2023, about summer of 2023, that's when we came up
with the light paper for Bitcoinsticking and we start talking to
various communities and indeed the Bitcoin oh geez, supposed to
be quite conservative. However, I must say, overall we
(11:01):
find a reception pretty good andI think we're helped by a few
external forces. So if you remember earlier that
year or notes started or notes started and that was sort of a
mindset change to Bitcoiners that hey, you know what, Bitcoin
has more use cases than just Hodo and a payment system.
(11:26):
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 start emerging and so forth. And I think we kind of helped by
that broader movement of sort ofa new way of look at Bitcoin, we
call it Bitcoin Renaissance. And I think we became sort of a
(11:48):
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 you know,
(12:10):
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
(12:31):
far still like the and not a lotof upgrades have happened in
Bitcoin and it's still like verylimited.
So how did you guys manage to reenable that staking
functionality in Bitcoin? Yeah.
In fact, when we were discussingabout Bitcoin staking, one of
(12:54):
the early idea we had in fact was the through discussion with
Sunny Algo while you're talking about the Cosmos ecosystem.
So in fact, Sunny came to me andone of the you you remembered at
the Cosmo verse in Medellin, Sunny talked about mass
security, mass security, and that was the security between
Cosmos blockchains and E Denver,which was in 2024.
(13:17):
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 Sonia, I
remember, still remember very, very vividly was, hey, would it
be great if we can bridge Bitcoin to one of these Cosmos
(13:40):
chains like Babylon or Osmosis and then share security through
the mass security network? OK, So that was our sort of our
initial thought, but then we hada 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
(14:00):
secure Bitcoin bridge beyond just like a multi state bridge.
And, and then we went back to history and we noticed that in
21 five, there was an effort called drive chain, which is to
upgrade Bitcoin to enable such abridge to happen.
It's called draft. You can look back.
I think the first proposal came up around 2015 type frame.
(14:22):
But then I, I, I talked to Stanley.
I say, you know, Stanley, there's a problem here because
today we are 2024 and this proposal was issued in 2015 is
still not passed yet. So I don't think we should wait
for this drive change to happen because this is 9 years down the
road here. And who knows, we may have to
wait nine more years. And so we start thinking so, but
(14:46):
after this discussion was suddenly we, I came back to the
team, we start 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 sort of one of the key sort of new ideas this past year
(15:10):
from a research point of view isthat 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 fall. And so that has been sort of our
sort of drive to accomplish thatand for Bitcoin sticking, we
(15:34):
accomplished that. And you also you may also know
like new ideas like bit VM bridge for example, that is
another way of sort of trying toaccomplish that a different
functionality bridging in that case without soft fork.
How, how important is this, thisopcat upgrade and maybe for
(15:55):
perhaps would 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.
Opcat is basically concatenating2 strings together.
Sounds like something stupid, something very basic.
(16:17):
But yet Bitcoin scripting doesn't support that.
And in fact, it was in the original version of the Bitcoin
scripting language by Nakamoto, but it was deleted by Nakamoto
himself. And so the effort here is to
restore that that OP code. Now, one it, it can accomplish
many things, but one thing it can accomplish through some
(16:39):
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. There you you can put
restriction on where and how andhow much to spend to who.
(17:04):
That is not possible in the current Bitcoin scripting
language and enabling that turnsout to be rather powerful and it
could make many things much simpler and significantly
cheaper in terms of transaction fees.
In other words, when instead of writing a lot of code and having
to allot a huge script, you can get by with a much more compact
(17:25):
script, and that's what opcat enables.
Does it also enable multiplication?
Is is is it useful in the ability to do proofs on chain as
well? Yes.
So there's a lot of effort by Stocknet and a few and a few
(17:46):
teams to do so-called a ZK proofverification on chain using
OPCAT. And I'm not an 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 virtual stock is called Circle, circle
(18:10):
stock and that enables some multiplication, but I'm not an
expert in that area. So yeah.
OK, got it. I mean, are you, are you aware
of any of the current attacks and 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 by the Bitlare team to do a proof
(18:31):
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 whether the proof is a
correct proof on chain so that you can tell Bitcoin to spend
the money in the appropriate to the appropriate person.
(18:53):
Yeah, my statement was 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 that or 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
(19:13):
of the Bitcoin scripting language.
And so all these efforts are trying to do that.
So, 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't is passed, then you can implement more
efficient, say multiplication that you mentioned.
(19:35):
OK, so that's one effort, but that effort has a problem
because it assumes OP can't. And I don't think we're close to
seeing OPI cat pass at this moment.
And so the other effort is not assuming OP cat, but using an
approach called optimistic verification.
(19:58):
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 arechallenged by an external
challenger, then you do the verification.
(20:20):
And that verification you can docheaper because the challenger
can pinpoint a specific part of the computation or the
verification is like, hey, you know what, I think this part
you've cheated. Please show me the correct your
verification of this part and I can convince Bitcoin that you're
actually wrong. And so, and this is a bit like
(20:41):
the Abatron type ideas. And I think that approach is in
some sense more practical because it doesn't assume, oh,
we can and I'm I myself is doingresearch 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
(21:03):
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
sticking is a completely native Bitcoin use case.
(21:23):
So it's direct interaction with the Bitcoin chain.
So what happens here is that if you have one Bitcoin, your one
Bitcoin is held in a so-called UTXO.
UTXO, OK, so now you create another UTXO yourself and you
send that Bitcoin to that UTXO still under your own custodian
now, but that utexo has a few special spending conditions.
(21:47):
Spending conditions. The what for one is that is a
time lock, is 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 the Cosmos chains, an
unbounding request. So there's a time lock
mechanism. 2 is that there is a slashing mechanism and that's
(22:11):
this is the crucial part of how this Bitcoin can provide
security to a say Cosmos chain or a roll up is that this
slashing condition is activated with associate with a what we
call finale provider or in more standard proof of stick
(22:32):
language, a validator. This valid is in charge of
securing a proof of state chain or blow up and the contract here
is that as low as this value is honest, this slashing condition
is never activated. Never activated.
However, if it does something bad, then this slashing
(22:52):
condition can be activated and your fraction of your one
Bitcoin can be spent through theslashing and sent to a burn
address. So this is roughly how it works.
So you as a sticker has to pick one particular phonetic provider
that you stick to, and it could be yourself.
(23:14):
Can you tell us a little bit about, so now someone is staking
the Bitcoin and then we have these Bitcoin secured networks,
right? So these are some networks that
now are relying on this Bitcoin security.
How do the Bitcoin secured networks work?
(23:34):
So just to clarify, we are rightnow in phase one of our main net
launch, OK, the Babylon protocolis launched in Phase 1.
So in phase one only staking only locking of the stick occurs
and there are no Bitcoin secure network yet.
(23:55):
Oh, in phase two and three, we'll launch a more we'll launch
Bitcoin secure networks now. So so example of such networks
could be, I don't know, osmosis or roll up like this this this
world called corn that we work with.
So how does it work? OK, so there will be daily right
(24:21):
now on our network, there are 200 around 200 finale providers.
OK. So Figment and P2P etcetera or
Cosmo station etcetera, these are finale providers.
And now when these BSNS, Bitcoinsecure networks are launched,
some of these finale provider will choose to secure these
(24:45):
networks, OK. And to secure these networks,
they will sign some special signatures to certify these
blocks as Bitcoin secure. 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.
(25:07):
And so their slashing capabilityis to make sure that they do
that. In other words, they cannot
double sign two blocks to try tofork the chain.
And this is where the security comes from.
So in so when a client in one ofthese networks sees many these
(25:28):
finale providers signature, thenthey know, wow, 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, OSMO and it has, you
know, a significant number of validators already.
(25:51):
If that now becomes Bitcoin secure network, then like how
does that interact with the existing security system that
that's already there? Yeah.
So that's a very good question. That's right.
Osmosis already evaluated signing the blocks.
So why do we need these Bitcoin secured signatures?
(26:14):
Well, so you can think of a goodanalogy, AUS analogy would be
like a House and a Senate. OK, so legislation avoided by
both the House and the Senate. Very American, sorry, very
American example, but I do live in the US.
So so the same similar system would be happening in the
(26:35):
osmosis case. So the osmosis validators would
sign on the block as the first committee.
And then on top of that, there'sanother committee, which are
these Bitcoin secure signatures because the finale provided
signatures that signs a gain on top of this block.
So a client we'll check both theOsmosis interest and the finale
(27:00):
provider signatures and see that, OK, 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, I don't know what exact number
today, but example 300 million. On top of that you have another,
(27:24):
I don't know, 1 billion of Bitcoin stake 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 stake by itself.
What what's the utility? I mean like you know, for, for
chains with like arguably good security like Osmosis or the
(27:47):
Cosmos Hub that are secured by like large amounts of stake,
what's the tangible benefit for users to have that additional
layer of security, you know, purely on the security side, I,
you know, I understand that there is like implications here
in terms of having the ability to bridge over liquidity
etcetera. How does that play out?
Oh, but the bridge over liquidity is the key to the
(28:09):
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 thechain, then you should have
corresponding amount of securityto protect that asset.
So therefore the value of for osmosis of increasing the
(28:32):
security is precisely to absorb or to attract more liquidity, to
attract more liquidity into the tax etcetera.
Now actually there's a very tangible way.
So this sounds like very abstract, right?
So how do you get more? You get the fact that you have
more security doesn't mean you have more liquidity is a
necessary, but not sufficient. However, in the case of Bitcoin
(28:55):
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 ofBabila.
So Babylon provides the stickinglayer.
But what happened in the past six months is that several
(29:18):
rather prominent projects have built liquid sticking 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
(29:41):
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, 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
(30:02):
Bitcoin liquidity, right? And now, you know, in addition
to whatever a billion dollars worth of Bitcoin security, you
get like as maybe a few 100 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 attractiveis, is this the case then?
(30:25):
Because the security can be usedon on different chains at the
same time, right? But the liquidity that can only
go to one place, is that right or?
Correct. Liquidity can only go to one
place. Security can be shared and
(30:47):
that's really up to the users. So the user takes the one
Bitcoin, right. In the example, Brian that you
had one Bitcoin, the user can say OK, I want this one Bitcoin
to only secure osmosis or it cantake this one Bitcoin and do
what we call multi sticking or restaking, which is to stick
multiple chains. That's an option entirely from
(31:10):
the stakers perfect perspective.The liquidity is directed to one
particular chain, correct? So when the user says hey I want
to secure multiple chains and and basically restake the
Bitcoin or or stake or multi stake the Bitcoin, then would
(31:30):
this also involve some changes on the Bitcoin side like some
additional transactions or if that happens purely through the
activity of the finality provider that the user states
the Bitcoin with? Everything should, everything
(31:53):
should be reflected on the Bitcoin chain, right?
Because the Bitcoin chain is thefinal 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.
(32:15):
OK. So if you have, if you decide to
stick only on Osmosis, then you would only have one slashing
condition associated with the finale provider on Osmosis.
But if you decide to stick on two chains, Osmosis and I don't
know Cosmos Hub, then you will have two slashing conditions, 1
(32:36):
associate with a Fernando provider on Osmosis and one
associate with a Fernando 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?
(32:58):
Burnt, yes. Not the entire Bitcoin, but a
fraction of the Bitcoin. This is this is where I'm I'm
not clear. Maybe you can elaborate here.
So as a as a staker, So if I'm holding Bitcoin and I want to
stake my Bitcoin with Babylon the Bitcoin, you you said
(33:19):
earlier that there's no requirement to send that Bitcoin
to a third party address. So because it's it's self
custodial, how would those slashing conditions be applied
then? It's self custodial, but the
slashing condition is associatedwith the finale provider that
you chose. OK, so maybe think of a typical
(33:44):
example. In Cosmos Chain, there's a
notion called delegation, right?You delegate your stick to a
particular validator like you know, Cosmo station.
So in some sense the staker is trusting Cosmo station to do the
right thing. It would not double spend and
(34:05):
get the stickers Bitcoin or not Bitcoin in that case, that may
be Osmo staked a slash. So the same delegation is
happening here in our design forBitcoin sticking as well.
And of course, you can always run your own phonetic provider
if you don't trust anyone else to do the right job.
And indeed, there are stickers that are running their own
(34:26):
phonetic provider right now because they have so much stake.
They don't want anyone and trustanyone else.
They run for their provider. Right.
OK, so basically what you're saying is that the staking
rewards are off for slashing butnot the original like collateral
or like delegated tokens? No, no, no, no, no, no, that's
(34:47):
not true. That's not true.
So, OK, let me let me let me make sure the contract, OK, the
sticking contract is that your stick is safe except only the
condition. Excellent.
In the condition that the finaleproviding you delegate to double
(35:07):
sides. OK.
That's the contract. You have a double size, you will
lose a fraction of just 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 aboutthe Babylon chain, right?
(35:29):
Because Babylon also is launching a Cosmos chain, the
Babylon chain, which is going tohave its own staking token.
What's the relationship between your the Bitcoin staking and the
Babylon chain and then these Bitcoin secured networks?
(35:49):
OK. So yeah, so the Babylon Chain is
playing a multiple roles here. So first of all, Babylon Chain
will be the first Bitcoin securenetwork.
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
(36:12):
Phase 1 is finished. So that's the one number one
row. Now the second row is when all
the BSNS come online, which is our phase 3.
Then the Bitcoin secure, then the Babylon chain will act as a
coordination layer, coordinationlayer between Bitcoin and all
(36:36):
these other BSNS. Because if you think about it,
our system is actually the wholeBradburn protocol is a
interchange system because it involves multiple block chains.
The stick is sitting on Bitcoin,but the finance providers are
(36:57):
voting on the BSNS. 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 example, you
(37:20):
mentioned time stamping 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
(37:42):
with this time stamping because Babylon itself time stamps to
Bitcoin. And this time stamping is very
important because you need to synchronize the timing between a
BSN and Bitcoin so that for example, when you unlock we
unborn a stick, then the Bitcoin, the valid, the
(38:03):
financial provider voting power can be removed immediately on
the BSN. So a time coordination is very
important in this interchange system.
Right. And then the nice thing is that
because the Babylon chain is a proof of safe chain, so it can
(38:23):
have very fast blocks. So you can have this time
stamping kind of, you know In Sync with the speed of all of
these chains for Babylon chain. And then that basically sort of,
you know, aggregates and time stamps that to Bitcoin sort of
on the like running a little bitbehind, but you know, still
(38:45):
providing like, you know, high, high degree of security.
Exactly, the aggregation that you mentioned is the most
important, one of the most important thing because imagine
a world where there are hundredsof these BSNS.
If each of these chains have thedirectly build their own
infrastructure, the time stamp to Bitcoin, it's just not a
scalable solution to have so many time stamps on the Bitcoin
(39:08):
chain. And so Babylon chain serves as
this aggregation row so that youonly 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
(39:30):
they be issued in many differentplaces?
Yeah. So yes, we are 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 would be some
(39:53):
infrastructure to support to do that in a trust minimizing way.
So like taking a step back here,there's been I, I find this like
quite, quite surprising actually, But you know, when I
was at. Proof of stakes second summit
just recently. And there were there were people
(40:14):
there 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 ofscenario.
But you know, at this point, how, how do you think about that
idea? And like, what is the likelihood
that in some time, what would that look like, you know,
(40:37):
Bitcoin moving to proof of stake?
Yeah. So just to clarify, right, our
research, our, our project Babylon is not advocating to
turn Bitcoin into approval stakechain.
Our, our, our goal right now is to take this Bitcoin asset to
(40:57):
make it as useful as we can. And the use case we're focusing
on is used as a sticking asset to bootstrap or to improve the
liquidity and security of other block chains.
So that's the that's the focus of the project.
Now, in the distant future, if it happens that this idea is so,
(41:19):
so, so successful, so much otherblock chains, so much of the
entire crypto ecosystem is building on this Bitcoin
sticking, then at some point Bitcoiners may say, hey, maybe
we can also use the security to secure ourselves to improve the
Bitcoin security. If that day happens, then it
(41:40):
happens. If it doesn't happen, it doesn't
happen. So one thing, one thing
interesting about the evolution of crypto is that Bitcoiners
often said that all other block chains are test Nets for
Bitcoin. OK, So what does that mean?
That means that hey, if you havea new concept, you want to test
(42:01):
it on other block chains before you bring it back to Bitcoin.
And in some sense, Bitcoin sticking is kind of a 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
(42:23):
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 the asset to increase the security of Bitcoin
chain itself. That's a long way off though, I
think. Yeah, I, I, I feel like it's a
(42:45):
long way off as well if, if it were to happen.
But yeah, I find it like sort ofinteresting that people are
actually bringing this up as like as a possibility where, you
know, if you would have said this maybe 3-4 years ago, it
would have been no, no one was ever considering Bitcoin to move
to prove a stake. And now it's actually actually
being talked about. I think like one of the things
(43:08):
that's interesting here about Babylon and like generally
Bitcoin L twos is that it, it allows Bitcoin liquidity to move
into D5 and be better utilized in D5.
Well, there's a whole array of chains that also would fall in
this category. Many of the top 20 chains,
(43:29):
chains like Litecoin, XRP, Cardano, Dogecoin, these 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
(43:52):
that liquidity to more easily flow into D5 protocols.
What is your take on expanding, you know, Bitcoin liquid Bitcoin
re staking to other chains, perhaps other proof of work
chains, you know some script chains or or other chains like
the ones I mentioned so that we can grow liquidity and defy
(44:14):
using the liquidity that's already on chain?
Yeah. I mean, I could see the concept
that what it's the pro code thatwe came up with can be adapted
to applied on other particular proof of work chains which use
similar scripting language as Bitcoin.
Yes, I'm quite sure there are projects probably working on
(44:36):
that. Right now our focus is entirely
on Bitcoin, Bitcoin. So Bitcoin is a huge enough
asset that if we increase, if weget 1% of Bitcoin, there's
already quite significant accomplishment.
So we just focus laser focus on Bitcoin.
(44:57):
So we talked earlier a little bit about, you know, some of the
efforts to have, you know, some upgrades for covenants more OP
cat, more exclusivity. Now the way you guys are
building, right, you're not relying on that, but you you're
building basically on Bitcoin asit is.
(45:17):
But if some of those things wereto happen, would this change
Babylon or would this kind of bring, I know, some new
features? Or is it something where you
kind of feel like, no, we can make do of the way it is right
now and it doesn't really matter?
Yeah. So our technology is entirely
(45:42):
independent of soft fork, right.So that was our philosophy I
mentioned. So we do not assume soft fork
and our technology does not assume that.
Now if there is a soft fork likepassing some kind of covenants
or we can't or something similar, then yes, that would
make us to be able to do more things and in a cheaper way.
(46:09):
So right now a lot of the ideas around bit VM is basically to
get around this covenants issue.The the consequence though is
that there are some costs associated with it.
So the transaction fees tends tobe a little bit high and so that
(46:31):
could be reduced. So I think to me it's 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 this software.
(46:51):
So the Babylon ecosystem is really, you know, grown
tremendously I think over the past year or so.
There's a lot of projects. You know, 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.
(47:12):
So a lot of the innovations right now is really try to
figure out how to sort of coupleor add liquidity to the base
layer of sticking. And I think that's sort of where
we try to provide a lot of support as the base staking
(47:34):
protocol. So what are the timelines here?
You mentioned, you know, phase one, phase two, phase three,
Yeah. How do you see?
I don't know. What time frame do you see those
rolling out? Yeah, we're shooting for right
(47:54):
now we're in phase one. We have opened the cap three
times, cap one, cap 2, cap 3 andright now it's closed.
We have about 57,000 Bitcoin, 57,000 Bitcoin staked on the
Babylon protocol and phase two we are shooting for roughly end
(48:20):
of Q1, begin of Q2 time frame tolaunch the Babylon chain.
That's our phase two. And in phase three which
hopefully will happen maybe 1/4 after that is we will have a
bunch of initial cohort of BSNS,Bitcoin secure networks to
(48:43):
complete the entire picture. So that's the face lodge.
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 as you know, as a
long term Bitcoin holder who's helped Bitcoin for a long time
(49:05):
and always been like, oh, it would be great to do something
with it. I think it's super exciting and
of course there's someone you know Sebastian as well as me,
you know, they deep in the cosmos ecosystem.
It's it's amazing that here are those two things come together
and we've now seen such a vibrant ecosystem emerging
around Babylon. So super excited to see how
(49:26):
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 is the best yet. Thank you very much.
Thank you.
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