The second round of Babylon stake concludes quietly, with over 22,000 BTC participating.

The Bitcoin staking protocol Babylon recently completed the staking activities for the second phase (Cap-2). Although the staking lasted only 10 blocks, it still attracted nearly 23,000 BTC to participate. However, compared to the first round of staking, the community discussion heat and on-chain transaction fees have significantly decreased. What is the reason for this difference? Who is still actively participating in BTC staking? Let's analyze these questions together.

Why does the Cap-2 stage stake seem calm?

Looking back at the first round of Babylon (Cap-1) stake, users pushed the Bitcoin network transaction fees above 1000 satoshis/byte to participate in the staking, with transaction costs even exceeding 4% of the principal. Ultimately, within more than 3 hours, the staking limit of 1000 BTC was reached, with approximately 12,700 participating addresses.

In contrast, on-chain activities during the Cap-2 phase appear much calmer. Although the total amount staked reached 22,891 BTC with 12,570 participating addresses, the average network transaction fee during this period barely maintained around 30 satoshis/byte. The main reasons for this disparity are as follows:

1. Changes to the staking rules

Cap-1 staking has both a total limit and a single stake limit of 0.05 BTC. In contrast, Cap-2 adopts a "limited time, unlimited quantity" mechanism, with a staking period of 10 blocks, and raises the single stake limit to 500 BTC. This change allows users to stake according to the time progress, alleviating FOMO emotions. At the same time, the new rules are more suitable for the large demands of institutions and re-staking projects.

2. Stake points are diluted

In Cap-1, due to the staking cap of 1000 BTC, the 3125 points generated per block are relatively abundant when distributed proportionally. In Cap-2, although the points per block increase to 10000, the significant increase in the number of BTC participating in staking leads to a severe dilution of points earned per unit BTC. This somewhat affects users' enthusiasm to participate.

3. The staking power shifts towards institutions and project parties.

Data shows that the number of participating addresses for Cap-2 staking is basically on par with Cap-1, and even slightly decreased. In terms of staking sources, the proportion of re-staking projects has increased from 80% in Cap-1 to nearly 90%. This indicates that the main battlefield for Babylon staking has shifted towards institutions and re-staking projects, with ordinary users' direct participation decreasing.

Performance of Major Re-Staking Protocols

According to statistics, the overall share of the seven mainstream Babylon re-staking protocols in Cap-2 has reached about 90%. Among them, Lombard stands out the most, having staked 7166 BTC, accounting for 31.66% of the total in Cap-2. It is noteworthy that Lombard did not participate in staking in Cap-1 due to high transaction fees. As of now, the BTC deposited by users on its platform is 8081.8, with a platform staking rate (the ratio of BTC staked in Babylon to BTC deposited by users on the platform) exceeding 88%.

In addition, the staking rates of platforms such as Solv, Chakra, and pSTAKE have all reached 100%.

Has the development of the re-staking agreement deviated from the original intention of Babylon?

Babylon originally designed a trustless and self-custody solution aimed at allowing users to securely stake BTC and earn rewards. However, the rise of re-staking protocols seems to contradict this original intention.

From the perspective of returns and convenience, it is understandable that users choose to re-stake. Re-staking not only allows users to enjoy dual rewards from the platform and Babylon but also saves them time and effort. However, from a security standpoint, is this practice worthwhile? Does it contradict the trustless and self-custody philosophy emphasized by Babylon regarding BTC?

Currently, the Babylon re-staking protocol generally adopts a custodial scheme. The previous attack on Bedrock, which resulted in a loss of about 2 million USD, raised concerns among users regarding the security of re-staking protocols. If the principal staked by users faces security threats, then the points earned as rewards will also lose their significance.

The principle "Not your keys, not your coins" has always been an important tenet in the cryptocurrency space. Babylon attempts to unleash the potential of BTC without violating this principle. However, if the security of staking protocols within the ecosystem does not improve, or if the proportion of native staking continues to decline, then Babylon may face risks contrary to its original intention.