VIDEO - Sankha Banerjee (Babylon): "Offering bitcoin holders a new source of return".

Friday, August 23, 2024

Read the interview with Sankha Banerjee, Chief Protocol Economist at Babylon, a protocol that proposes to introduce staking and restaking on Bitcoin.

On the occasion of our "Season" dedicated this week to Bitcoin, we chose to talk to Sankha Banerjee, Chief Protocol Economist at Babylon, who proposes to introduce staking as well as restaking on Bitcoin.

Read - Staking: opportunities and future innovations (Report)

The value proposition is similar to that of EigenLayer on Ethereum, since Babylon will enable projects to take advantage of the security provided by Bitcoin and thus no longer be obliged to set up their own community of validators, which is often very costly. Bitcoin holders will then be able to contribute to the security of other blockchains and thus receive additional rewards from these other blockchains.

"Bitcoin is the cryptocurrency that still largely dominates the market and whose security no longer needs to be proven. But until now, its holders have only had access to a very low return, hovering around 1% on lending protocols most often via Wrapped Bitcoin," explains Sankha Banerjee, Chief Protocol Economist at Babylon.

"As with staking on Ethereum, the idea is to introduce a new source of return that is among the least risky on the market, but this time based on Bitcoin, for DeFi (decentralised finance) players," adds Sankha Banerjee, who claims that returns could be between 6% and 10%.

As with EigenLayer with Ethereum, Babylon is acting as a precursor. Market expectations are relatively high, since the protocol managed to complete a round of financing led by Paradigm valued at $70 million at the end of May.

An active mainnet since 22 August

As with EigenLayer, the protocol will first seek to attract capital. Since 22 August and the launch of the 1st phase of the mainnet, investors have been able to deposit their bitcoins via third parties such as Kiln or the OKX platform. Babylon will then begin to integrate various projects seeking to benefit from the security of Bitcoin. Finally, the slashing mechanism will be activated.

For the record, Babylon's current CEO and co-founder, David Tse, actively worked with the Ethereum Foundation to organise the migration of the network from PoW (Proof-of-Work) to PoS (Proof-of-Stake). He also had Sreeram Kannan, none other than the CEO and founder of EigenLayer, as his assistant at Stanford for two years.

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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