Bitcoin staking protocol Babylon phase two sparks controversy

Recently, the Bitcoin staking protocol Babylon completed its second phase of staking activities (Cap-2). Although the staking lasted only 10 blocks, it attracted nearly 23,000 BTC to participate. However, compared to the first phase (Cap-1), the community discussion and on-chain transaction fees for this staking have significantly decreased. This contrast has sparked curiosity about the identities of the participants and their staking motivations.

Why is the Cap-2 stage stake calm?

Looking back at the Cap-1 phase, users experienced a surge in Bitcoin network transaction fees, which soared to over 1000 satoshis/byte, with transaction gas consumption exceeding 4% of the principal. In the Cap-2 phase, the network transaction fees only maintained a maximum of around 30 satoshis/byte. The reasons for this difference are mainly three:

1. Staking rule changes: Cap-2 has removed the staking limit and adopted a "limited time unlimited quantity" mechanism, while increasing the single-stake limit from 0.05 BTC to 500 BTC. This change alleviates users' FOMO feelings and better meets the needs of institutions and re-staking projects.

2. Stake Points Dilution: The points generated per block in Cap-2 increase to 10,000 points, resulting in a significant decrease in the points earned per unit of stake. For example, staking 0.05 BTC could earn 0.15625 points in Cap-1, while in Cap-2, it can only earn 0.0209 points.

3. Institutions and project teams dominate: According to statistics, mainstream re-staking projects account for nearly 90% in Cap-2, while the proportion of native stakers may be less than 10%. This indicates that Babylon staking has become the main battleground for institutions and re-staking projects.

Main Stake Participant Analysis

According to the data, the total staking share of the 7 mainstream Babylon re-staking protocols in Cap-2 has reached about 90%. Among them, Lombard stands out, having staked 7166 BTC, accounting for 31.66% of the total in Cap-2. It is worth noting that Lombard did not participate in staking in Cap-1 due to excessively high fees.

In addition, the staking rates of platforms like Solv, Chakra, and pSTAKE have reached 100%, demonstrating the high participation of these restaking protocols in the Babylon project.

Controversy Arising from the Re-staking Protocol

Although re-staking protocols provide users with convenience and additional income, their existence has also sparked some controversy. Babylon was originally designed to offer a trustless and self-custodial staking solution, while re-staking protocols, as intermediaries, may contradict this original intention.

Security is the main concern. For example, the previous incident where Bedrock was attacked resulted in a loss of about $2 million raised users' doubts about the safety of the re-staking protocol. If users' staked principal is under threat, the points earned may become worthless.

In addition, the prevalence of re-staking protocols may lead to a continued decline in the native staking ratio, which contradicts Babylon's intention to release BTC's potential without violating the "Not your keys, not your coins" principle.

As the Babylon ecosystem develops, how to balance security, decentralization, and user convenience will become an important issue. In the future, Babylon and its ecosystem participants need to pay attention to and upgrade security measures while encouraging more users to participate in native staking to uphold the project's core value proposition.