Babylon Staking Protocol Sees $1.4 Billion in Bitcoin Delegated During Successful Second Round

The Bitcoin staking protocol, Babylon, recently had a successful second round of staking. They pulled in about 23,000 BTC on Tuesday. That’s a big jump from the first round, and this time, users had a smoother experience since Bitcoin fees didn’t spike.

David Tse, one of the co-founders of Babylon and a Stanford professor, shared that this round, called Cap-2, went “pretty well.” Users delegated a whopping $1.4 billion in Bitcoin to the protocol. That definitely exceeded their expectations.

Babylon is building a two-sided marketplace using Bitcoin’s reserves. On one side, users can lock up their Bitcoin for future rewards. On the other side, proof-of-stake networks can use that capital for security. The team is focusing on enhancing Babylon’s supply side before connecting with various rollups and networks. They believe that networks like Ethereum and Solana could really benefit from Bitcoin staking.

During the second round, the amount of Bitcoin delegated was impressive. However, the process was much more organized than during the initial lock-up in August. In the first round, staking was limited to 1,000 BTC. This led to transaction costs soaring to $132. But this time, the median cost per Bitcoin transaction peaked at just $2.37. That’s a huge relief for Bitcoin users.

The improvement is due to “updated parameters” set by Babylon Labs for this round. Instead of capping the total amount of Bitcoin that could be staked, they switched to a “duration-based” approach. In a 10-block window starting at block 864790, users could stake unlimited Bitcoin, but each transaction was limited to 500 BTC. In the first round, users could only stake 0.5 BTC per transaction, with an overall cap of 1,000 BTC.

The rules in the first round created a rush. Participants felt they had to pay extra to get their transactions through. Nick Hansen, CEO of Luxor Mining, explained, “When there's a limited amount of space and everybody's racing to get into that space, that produces a high time preference for transactions. The only way to speed up transactions is to increase the fee.”

Before the second round, the team adjusted the parameters to make it easier for users to access the protocol. Tse mentioned that similar opportunities will likely come up in the future. The gap between the first and second rounds was mainly due to technical reasons. “The first round was very small, mainly for security reasons,” he noted. They wanted to ensure the protocol was secure and had a bounty program to test the system.

In late May, Babylon announced they completed a $70 million funding round led by Paradigm, with Galaxy and Polychain Capital also participating. This followed an $18 million Series A funding round from late last year.

While the project is still in its early stages, Babylon plans to create its own proof-of-stake network called Babylon Chain. Tse explained that this network will serve as a primary “coordination layer,” allowing others to use locked Bitcoin to help secure additional chains.