Babylon Cap-2 attracts funds exceeding $1.2 billion, who is still crazy pledging BTC?

Original | Odaily Planet Daily (@OdailyChina)

Author | Golem (@web3_golem)

Yesterday, the first phase of BTC stake protocol Babylon Cap-2 stake ended, with nearly 23,000 BTC participating in the stake despite only lasting for 10 Blocks. However, in terms of community discussion and on-chain transaction fees, the stake for Babylon Cap-2 phase appears to be much calmer. What are the reasons for the differences before and after? Who is still staking BTC like crazy?

Odaily Planet Daily will analyze the above issues in this article, and compile statistics on the stake situation of mainstream Babylon re-stake protocols in Cap-2. Finally, it will briefly discuss whether there are hidden risks to user fund security and the development of the Babylon ecosystem as the re-stake ecosystem expands.

Why is Cap-2 stage stake so calm?

Reviewing the Babylon Cap-1 stake phase, in order to stake BTC into Babylon, the BTC network transaction fees were pushed up to over 1000 Satoshi/byte, and the transaction gas consumption exceeded 4% of the principal. The stake limit of over 1000 BTC was reached in just over 3 hours, with approximately 12,700 participating addresses.

On the other hand, the staking in Cap-2 phase on the chain is much calmer, with a total staking amount of 22891 BTC and 12,570 participating Addresses. However, the average network transaction fee during this period also remains at only 30 Satoshi/byte. The main reasons for this difference are as follows:

stake rule change

In Cap-1stake rules, there is not only stake hard cap, but also a maximum stake transaction limit of only 0.05BTC and a minimum of 0.005BTC. In contrast, Cap-2stake has removed the stake upper limit and changed to a "limited time unlimited amount" stake mechanism, with a stake period of 10 Blocks (864790-864799), and at the same time increased the maximum single stake amount from 0.05BTC to 500BTC.

The mechanism of limited time and unlimited quantity can to some extent alleviate the user's fear of missing out emotion, according to the time progress stake. The adjustment of the upper limit of a single stake may have little impact on individual retail investors, but it may have a greater impact on some staking protocols and institutions. Because their stake volume is often large, a low upper limit for a single stake will force them to trade more frequently, which is more likely to cause on-chain congestion. The upper limit for a single stake in Cap-2 phase is 500BTC, which is suitable for the needs of institutions and staking projects.

Therefore, the change in the stake rules is the main reason for the "calm" on the Babylon Cap-2stake chain.

stake points are diluted

In Cap-1, because of the stake cap of 1000 BTC, the 3125 points generated by each block are distributed more points according to the stake ratio, for example, if an Addressstake has 0.05 BTC, then each BTCBlock can earn 3125* 0.05/1000 = 0.15625 points. The "head mine" benefit is also the biggest reason why Cap-1 can cause fear of missing out.

With the unchanged points distribution mechanism, the points generated per Block will increase to 10,000 during Cap-2. If an Address still stakes 0.05 BTC, they can now earn 0.0209 points per BTC Block.

It can be seen that after Cap-2stake is launched, the stake points will be severely diluted, which will also affect the enthusiasm of users to participate to a certain extent.

Stake is already dominated by institutions and project parties

According to statistics, there are 12,700 addresses participating in Cap-1stake, while there are 12,570 addresses participating in Cap-2stake. Not only did there not appear a significant rise, but there was even a slight decrease in the number of addresses.

In Cap-1stake, according to official disclosure, about 80% of the 1000 BTC stake comes from the LST project of the liquid stakeToken, and about 20% comes from native stakers. In Cap-2stake, the proportion of restaking projects has further increased, according to Odaily Star Daily statistics, the proportion of mainstream restaking projects has already approached 90%, and the proportion of native stakers may already be less than 10%.

The main battlefield of Babylonstake undoubtedly belongs to institutions and stake projects, which are professionally staked through custodians and some trading confirmation service providers. For users who have already deposited BTC into the restake platform, the entire process does not need to be directly involved, and even follow, just need to receive rewards at a specific time. Therefore, Cap-2stake looks 'calm' to a certain extent, also because of the continuous development and growth of the Babylon restake ecosystem, providing convenience for users.

Who stakes the most BTC crazily?

Odaily Planet Daily has compiled statistics on the current stake situation of 7 mainstream Babylon re-stakeprotocols in Cap-1 and Cap-2.

Based on the above data, overall, these seven stake protocols account for over 80% of the total stake in Cap-1, while the share in Cap-2 has increased to around 90%.

Among them, Lombard staked the most BTC in Cap-2, with a total of 7,166 BTC staked, accounting for 31.66% in Cao-2. Previously, due to high transaction fees in Cap-1, Lombard did not choose to stake BTC in Babylon. As of now, the amount of BTC deposited by users on their platform is 8,081.8 BTC, and the platform's loan-to-value ratio (the ratio of BTC staked in Babylon to BTC deposited by users on the platform) has reached more than 88%.

In addition, platforms with a loan-to-value of 100% include Solv, Chakra, and pSTAKE protocols.

Has stakeprotocol violated the original intention of Babylon again?

Babylon has developed a trustless and self-custody solution that allows users to securely stake their BTC and earn rewards while providing security for the POS system.

In the Babylon ecosystem, the stake protocol acts as an intermediary between users and Babylon. Users first deposit BTC into the stake platform, and then when Babylon stake is activated, they use business and technical expertise to help users stake BTC. In terms of rewards, users can enjoy dual points rewards from the platform and Babylon.

From the perspective of income and convenience, it is understandable for users to stake again. On the one hand, staking again can not only enjoy the rewards of the staking platform and Babylon, but also unilaterally enjoy the platform's staking rewards even without staking BTC in Babylon; on the other hand, because the Babylon staking rules and time are more complicated, the re-stake protocol can save users energy and time.

However, from a security perspective, is it worth sacrificing some security for the sake of returns and convenience? Is it even contradictory to the narrative of trust-free and BTC self-custody promoted by Babylon?

Babylon and stakeprotocol currently use a custody solution. Previously, Bedrock suffered an attack that caused losses of around $2 million on the DEX. Although the official team fixed the issue and compensated users, this event raised concerns about the security of stakeprotocol. Will there be other Black Swan Events in the future? When a user's stake is threatened, the rewards earned by staking will be worthless like 'happy beans.'

"Not your keys, not your coins", Babylon attempts to unleash the potential of BTC without breaking this principle, but if the security and upgrade of the stake protocol within the ecosystem are not valued, or if the native stake ratio remains low, then the problem may return to square one.