🟣 Behold the Babylon

Plus, most Polymarket bettors lose money

Author

Donovan Choy
October 09, 2024

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  • Babylon’s rising deposits

  • Chart: Polymarket users in the red

Babylon sees $1.4 billion in deposits

Babylon is a restaking protocol on the CometBFT consensus that saw a mainnet launch in August. 

As of today, the Babylon chain has racked up an impressive 23,000 bitcoin ($1.4 billion) staked from 25.3k stakers. That puts it in the TVL ballpark of major restaking protocols like Symbiotic ($1.5 billion) and EigenLayer ($10.7 billion).

Unlike previous sidechain attempts at bridging bitcoin to smart contract chains, Babylon offers a trustless coordination layer to do so without technically bridging bitcoin.

This is achieved through the use of Cosmos’s Inter-Blockchain Communication (IBC) protocol to communicate messages between networks, and a mix of cryptography methods like “covenants” to lock bitcoin in a time-locked self-custodial vault until conditions are fulfilled. Additionally, timestamping is used to synchronize a record of transactions on PoS chains.

To get around the lack of smart contract compatibility on the Bitcoin chain, Babylon’s design requires stakers to use their private keys to lock and unlock their stake, which is then delegated to a trusted validator for a fee.

In the event of malicious behavior, the validator’s private key is revealed and slashed with extractable one-time signatures (EOTS) — a concept that builds on Bitcoin’s Schnorr signatures algorithm.

This architecture allows bitcoin stakers to “bridge” their bitcoin into a PoS chain, and receive a yield that is paid out in the destination PoS chain’s tokens, a future feature to be implemented.

Presently, the two largest stakers are liquid restaking protocols Lombard, and Solv Protocol, which have a total delegated 7166 and 6009 bitcoin, respectively.

Solv Protocol also announced yesterday the Staking Abstraction Layer (SAL), a framework to standardize token standards across the growing number of bitcoin derivative tokens.

Due to its lack of smart contract capabilities, Bitcoin DeFi must go cross-chain. This in turn creates a need for such common standard frameworks. 

Various cross-chain token standards have been used in Ethereum DeFi to create standardization, such as LayerZero’s OFT (Omnichain Fungible Token) and Axelar’s ITS (Interchain Token Service) standard.

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Most Polymarket users lose money:

As with most casino-based businesses, most Polymarket users are unsurprisingly in the red. Based on Layerhub’s data, 86.7% of users have made losing bets on the prediction market. Only about 2,148 (1.2%) of Polymarket users have made profits of upwards of $1k.

The oracle landscape is changing rapidly as crypto upgrades from DeFi 1.0 to DeFi 2.0. Given these new dynamics, Total Value Secured is no longer an effective metric for evaluating oracles. Total Transaction Value is a more accurate measure of oracle fundamentals, as it is more strongly correlated to frequency of oracle price updates and therefore oracle revenue.

In a recent report from Blockworks Research, research manager Ryan Connor explains why moving to this measure meaningfully recalibrates our estimates of oracle market share, revenue potential, and the potential for oracle commoditization on a go forward basis.

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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.