Babylon's David Tse on the Historic Launch of Bitcoin Staking

As Bitcoin continues to solidify its place as the world’s most secure blockchain, innovative projects like Babylon are pushing the boundaries of what’s possible beyond simply HODLing.

This week, Babylon co-founder David Tse returned to Coinage to discuss Babylon’s latest developments, including the highly anticipated launch of Bitcoin staking, which saw a flurry of activity that spiked transaction fees on the Bitcoin network as users scrambled to participate.

The milestone represents a significant leap for Bitcoin beyond its traditional use case as a store of value. Babylon’s test launch, which capped Bitcoin staking at 1000 BTC, sparked excitement and led to transaction fees soaring to more than $100 as users vied for early participation.

“It’s the first time Bitcoin can be used for staking in a trustless way,” Tse told Coinage in the interview above. “A lot of people wanted to be part of this historical event.”

For those unfamiliar with staking, Tse highlighted its importance in securing decentralized networks. While Ethereum has popularized proof-of-stake in the blockchain world, Babylon’s vision is to extend Bitcoin's security to other chains in a trustless manner, meaning users don’t need to rely on third-party custodians to manage their assets.

“Security is central to Web3,” Tse emphasized. “Staking provides that security.”

The surge in demand for Babylon’s staking protocol, despite the relatively small cap and participation limits, suggests Bitcoiners are hungry for more ways to leverage their holdings beyond simply holding. Tse and his team kept individual staking amounts small —0.05 BTC maximum per wallet — to encourage broader participation and allow more users to experience the system. About 20,000 unique Bitcoin addresses participated, reinforcing the idea that Bitcoin holders might not be as conservative as some might think.

"When we started educating folks about the idea of Bitcoin staking last year, a lot of people [told] us Bitcoin holders are very conservative. They'll never do anything else on the Bitcoin [network] rather than hold it," Tse said. "But our experience and our interaction with the community in the past years, I think, have shown otherwise."

Babylon’s staking launch arrives at a critical moment for Bitcoin. As institutional interest in Bitcoin continues to grow, spurred on by Bitcoin ETFs and increasing mainstream adoption, Babylon’s approach offers Bitcoin holders a new way to earn yield on their holdings without the need for centralized intermediaries. In a world where many Bitcoin ETFs offer little more than passive exposure to price movements, Babylon is unlocking Bitcoin’s potential to participate in securing proof-of-stake networks.

“There’s no yield on Bitcoin held in ETFs,” Tse pointed out. “We’re creating a new use case for Bitcoin that generates yield in a trustless manner.”

Looking ahead, Tse sees staking as a foundational element of the Bitcoin ecosystem, one that other decentralized finance (DeFi) applications can build upon. Much like how Ethereum staking has given rise to new liquid staking protocols and other DeFi applications, Babylon’s Bitcoin staking is laying the groundwork for similar innovations.

“Staking is becoming a basic primitive that people can build on top of,” Tse said. Babylon is already seeing liquid staking protocols integrate with its platform, allowing users to earn liquidity receipts for use in DeFi applications.

But the Babylon team isn’t stopping there. The roadmap for the project is ambitious, with plans to gradually increase the staking cap and expand the use of staked Bitcoin to secure other proof-of-stake chains. Phase one of the project, now complete, focused on gathering data and fine-tuning the system. Phase two, set to launch in the coming months, will leverage the staked Bitcoin to secure Babylon’s own blockchain, which will serve as a coordination layer for other proof-of-stake networks. “Each cap is an experiment,” Tse noted, emphasizing the importance of collecting user data and behavior to inform future expansions.

One of the most intriguing aspects of Babylon’s vision is the potential for Bitcoin to enhance the security of other blockchains. “We’d like to move away from networks relying solely on volatile native assets for security and instead use Bitcoin, the largest and most secure asset,” Tse explained. This concept represents a significant shift in the mindset of proof-of-stake networks, many of which currently rely on their own tokens for security. Babylon’s approach could usher in a new era of cross-chain security, with Bitcoin playing a central role.

Beyond Bitcoin staking, Tse is also bullish on the development of trustless bridges, a technological advancement that could further enhance Bitcoin’s role in the broader Web3 ecosystem. Trustless bridges would allow for the creation of wrapped assets — such as wrapped Bitcoin — without the need for centralized custodians like Coinbase. Projects like THORChain have been leading the charge on enabling this by creating a separate bridging chain powered by a native token.

While Bitcoin ETFs and centralized custodians like Coinbase continue to attract billions of dollars in institutional investment, Tse remains focused on the long-term goal of decentralization. He acknowledges the role centralized players currently play in the ecosystem but believes the future of Web3 lies in trustless, decentralized solutions. “We’re in Web3 for the long run,” Tse said. “In the long run, we want more decentralization.”

With staking caps set to expand and new phases of the Babylon project rolling out, Bitcoiners have more reasons than ever to pay attention to what Tse and his team are building. As the year winds down, Babylon’s progress represents an exciting glimpse into the future of Bitcoin — one where the world’s most secure blockchain isn’t just a store of value, but a foundational layer for a more decentralized, secure, and interconnected Web3.

Coinage members can watch our full episode with David Tse above. To support our community-owned outlet, own it with us, and unlock other exclusive benefits, mint one of our Membership Passes today or Stake with us today! Chat with Coinage in our Discord.