Bringing Bitcoin security to the Cosmos Hub with Babylon

With Interchain Security, the Cosmos Hub has been able to provide a substantial amount of proof of stake security to its consumer chains. But how can we push this even further? What if the Cosmos Hub could act as a security aggregator- bringing together billions of dollars of security from multiple assets, a battle tested validator set, and innovative consumer chains?

This is what this proposed Babylon x Cosmos Hub integration is setting in motion. Babylon’s Bitcoin staking technology will allow bitcoin holders to stake their bitcoins to secure Cosmos Hub ICS consumer chains. This will:

  • Give ICS consumer chains access to hundreds of billions of dollars in potential security.
  • Solidify the Cosmos Hub’s position as a security aggregator, bringing together staked assets from many sources, a battle tested validator set, and innovative consumer chains.
  • Onboard bitcoin holders to Cosmos when they claim their staking rewards.

How will it work?

If it is approved by Hub governance, security aggregation using ICS and Babylon will work with a CometBFT extension which will be added to both the Cosmos Hub blockchain and all consumer chains. This will allow the Babylon scripts on the Bitcoin blockchain to detect when a validator double signs. Bitcoin stakers will be able to select a Hub validator to stake to, and their staked bitcoin will add to that validator’s power on the Hub, and any consumer chains that validator is opted into.

One important thing to note is that this does not introduce any new trust assumptions. Babylon’s Bitcoin staking protocol does not require bridging and is trustless and self-custodial.

Every consumer chain will be able to set a security budget for each asset being restaked through the Cosmos Hub. For example, a consumer chain might decide to allocate 75% of their rewards to their native tokenholders, 15% to ATOM security, and 10% to restaked bitcoin. On top of this, consumer chain rewards going to Bitcoin restakers will be subject to a small tax which goes to ATOM holders.

To claim rewards, bitcoin holders will need to create a Cosmos Hub wallet and withdraw the rewards on the Cosmos Hub. This will onboard them to Cosmos. For many of them it may be their first experience on a blockchain other than Bitcoin. We will also implement some “quests” to activate their accounts and expose Bitcoin stakers to consumer chains such as Stride & Neutron. For example, this could include performing simple actions tasks such as liquid staking 1 Atom on Stride and doing a swap on Astroport on Neutron, etc.

So to sum it up: \

  • Babylon’s Comet extension will be installed on the Cosmos Hub and all its consumer chains.
  • Bitcoin holders will be able to delegate to Cosmos Hub validators, and will earn rewards.
  • Consumer chains will be able to select how much of their security budget goes to ATOM vs Bitcoin.

What is Babylon?

Babylon uses cutting-edge cryptographic technologies such as extractable one-time signature (EOTS) to convert slashable PoS attacks to spendable Bitcoin UTXOs for burning. This primitive, together with Bitcoin’s native time-lock, allows bitcoin holders to stake their bitcoins and participate in PoS security by simply locking their bitcoins on the Bitcoin network. No third party is involved, and the bitcoins are secure as long as the staker does not attack the PoS chain. Babylon also applies the most advanced Bitcoin timestamping protocol to enable tight synchronization between Bitcoin and PoS chains, which allows fast unbonding of the staked bitcoins.

Babylon’s Bitcoin staking protocol allows consumer chains to purchase economic security from staked bitcoins and acts as the control plane to facilitate this. Bitcoin holders can securely lock their bitcoins and choose which PoS chain(s) to stake for and earn yields from. PoS chains and dApps can opt-in to bitcoin-backed security and enjoy high security, healthy economics, and broader adoption. The protocol is modular and can secure any PoS chain. It also enables scalable restaking for bitcoin holders by simultaneously staking on many PoS chains.

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Groundbreaking initiative.

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Just saw this on Twitter! Super exciting news

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cosmos hub BD upping their game. love to see it

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I think its a well needed primitive Jehan. ICS is struggling on the BD side and given Ethos, Picasso, and persistence are working on restaking, the grand daddy of them all choosing to use ICS gives me hope. This could mark a new direction for the hub. Great work!

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It’s exciting to see a collaboration with Babylon. However, I’m curious about the sustainability of this initiative within the existing economic framework, especially considering that current revenues seem insufficient to cover the operational costs of validators. This scenario appears to potentially fragment an already limited revenue stream even further. From my perspective, i do not see any direct advantages for ATOM holders. A potential improvement could be to explore a model where consumers pay for Bitcoin security using ATOM, which might offer a more tangible benefit and align more closely with the interests of ATOM stakeholders.

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i’d also be a little more cautious about added frictions to staking with things like onboarding quests especially with the bitcoin community. It’s important to ensure that such initiatives do not inadvertently discourage participation.

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Would also like to know the quests as well.

this could be a gamechanger or am i wrong?

Hello, the idea seems attractive, however regarding the part: “Consumer chains will be able to select how much of their security budget goes to ATOM vs Bitcoin” , will there be a maximum percentage attributable to bitcoin security? why would they choose atom security? (at first probably out of habit, but gradually…?)

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Things are still pretty open as to how we do this. Currently, as the post says, we think there could be a tax for rewards going to BTC. So even if a consumer chain got 100% of security from BTC, Atom holders would still make money.

I really like @LitBit’s idea to require rewards paid to BTC to be converted to Atom first. This would also probably be a plus for Bitcoin users since Atom is a token they know about and they don’t want to worry about a bunch of different consumer chain tokens.

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The integration of Babylon’s Bitcoin staking technology into the Cosmos Hub, as outlined in your proposal, is a revolutionary step towards enhancing blockchain security and interconnectivity. The ambition to bridge Bitcoin with the Cosmos ecosystem is a bold use case. By tapping into Bitcoin’s market capitalization and its community, the Cosmos Hub could significantly strengthen its position as a security aggregator. This initiative could definitely enrich the Cosmos ecosystem, potentially attracting a new wave of users and investors.

However, several concerns require consideration, especially when we considered the typical Bitcoin holder’s mindset and the inherent risks associated with staking their precious BTC. For example:

  1. Smart Contract Risks: The reliance on smart contracts—or Babylon scripts—for this integration introduces a layer of technical complexity that could be a potential vector for vulnerabilities. Given Bitcoin’s design as a secure, decentralized currency, many Bitcoin holders are understandably wary of any mechanism that might expose their holdings to smart contract vulnerabilities. How can we ensure the absolute security of these scripts against unforeseen exploits?

  2. Validator Performance and Misbehavior: The proposal’s dependence on the integrity and performance of validators adds another layer of risk. Bitcoiners, who traditionally prioritize security and decentralization, might be hesitant to stake their BTC with validators whose actions could jeopardize their assets. What measures are in place to safeguard BTC stakers against the misbehavior or underperformance of validators?

  3. Market Volatility: The crypto market is renowned for its volatility. Bitcoin holders, especially those who subscribe to the “HODL” philosophy, may find the locked-in nature of staking antithetical to their strategy of holding Bitcoin through market ups and downs. How does the proposed staking model account for this volatility, and what assurances can be provided to those concerned about potential opportunity costs?

  4. Regulatory Risks: The evolving regulatory landscape poses another significant concern. Many Bitcoin holders are attracted to the cryptocurrency for its autonomy from traditional financial systems and regulatory bodies. Introducing a staking mechanism that intertwines Bitcoin with other blockchain ecosystems could raise regulatory scrutiny. How will this proposal navigate the complex regulatory frameworks that might impact Bitcoin stakers? For example, PoS Validators may be required to KYC stakers in some jurisdictions including the USA. Why would Bitcoiners want to risks their anonymity?

  5. Liquidity and Unbonding Concerns: The liquidity of staked BTC assets is a critical factor for investors. Bitcoin’s liquidity is one of its most valued features, enabling holders to react swiftly to market changes. The unbonding period required for staking could deter Bitcoin holders, who value immediate access to their assets. Can you elaborate on the unbonding process and how it accommodates the need for liquidity?

Beyond these concerns, the intrinsic ethos of the Bitcoin community has a strong commitment to the principles of long-term holding and skepticism towards actively managed or complex financial products raises a fundamental question:

What compelling incentives could possibly align with the values and motivations of Bitcoin holders, enticing them to stake their BTC? Bitcoiners, particularly those who are deeply invested in the asset’s philosophy as a secure store of value, might need more than just the promise of some minuscule rewards to venture into staking, an activity they traditionally view with skepticism. Furthermore, the Cosmos community ethos leans towards centralization and has shown reckless indifference to its community of Stakers stripping them of their earned rewards time and time again.

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This is an innovation, but I think there are a lot of doubts

This is like sharing the staking interests of atoms with all chains

Does DEFI multi-collateralization have security spiral risks?
Luna designed a 20% high profit margin game mechanism, which was unsustainable, so it eventually went bankrupt.
I don’t want the knock-on effects to be felt when risks arise

What are the benefits to ATOM stakers? Lose big rewards in exchange for small dust.

If you use btc eth ada bnb sol xrp to earn income from the atom consumer chain, although you can use this method to introduce new people, it means that ATOM pledgers are reducing their profits.

ATOM’s own economic design issues, relying on external forces may lead to a worse situation.
The reduction in profits will cause ATOM holders to lose confidence?

If ATOM needs to rely on currencies other than Bitcoin to increase the security of the consumption chain
That is actually a blow to the confidence of the consumer chain. If ATOM is useful enough, why bother using others?
As a cross-chain currency, ATOM is of no use at all. ATOM is not needed across chains. This is the key to its lack of power.
This just confirms ATOM’s uselessness

I think we must first explain more benefits and disadvantages of pledging high-quality coins such as BTC.

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I have two concerns in case this proposal is passed and there is a significant amount of BTC staked:

  1. What is in for ATOM? ATOM would have to share its Staking APR with BTC and in return may gain increased ICS fees. Out of economical perspective, is this a good trade-off?

  2. What can be done to prevent BTC Stakers from dominating the governance of the Cosmos Hub? If BTC becomes the majority of the staked tokens, what will stop them from proposing and passing changes that are detrimental to ATOM and the Cosmos vision?

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This is really huge! Leveraging security introducing the less volatile and most capitalized crypto asset into IBC!

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Could you please stop using GPT for writing in this forum?

  • 4 Analysis show that more than 50% of this message are generated by AI.

If you want to appear smart, use your own brain to create concise and direct messages.

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I strongly believe that the schelling point for paying BTC stakers is ATOM.

I think the Cosmos Hub needs to focus on communicating one asset as yield to BTC stakers and that asset should be ATOM

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These are my original thoughts, spell checked, punctuation checked, grammar checked, style checked, and formatted using Grammerly. Which last time I checked was not illegal to use.

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their staked bitcoin will add to that validator’s power on the Hub

by “power to the hub” do you mean staked btc will increase a validators vote power right?

Super grateful for all involved. Love the idea. However, ATOM as money needs to be top priority IMO. Thats what the tokenomics governance chaos has been all about. I would argue no more than 50% of staking rewards should be paid in BTC or anything other than ATOM.

Additionally, I listened to the Staking Rewards Summit and if i recall correctly, BTC staked with Babylon only yields like 3 or 3.5%. I wouldn’t put my BTC at risk for only 3% yield and think other BTC holders would feel the same way, if they’d even consider staking their BTC at all. I suppose the yield can be boosted by paying out in ATOM.

Really enjoyed the Twitter spaces. For those who didn’t hear it: https://twitter.com/cosmoshub/status/1757447297535762462?t=SHKY1kL490S8lDFGfLaWZg&s=19

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