Institutions get in line for staking bitcoin with Babylon

Bitcoin staking protocol Babylon officially hit mainnet today, opening up the potential for a massive expansion of opportunities to generate yield on otherwise dormant BTC.

A prime example of how Babylon will be used: making it easier to bootstrap security on proof-of-stake networks, paying bitcoin holders rewards in exchange for their stake.

To mark the occasion, Fordefi, a provider of MPC (multi-party computation) wallet technology for institutions, has announced that it is now fully compatible with the staking protocol. This integration clears the way for institutions to engage in the burgeoning area of Bitcoin DeFi, which includes staking.

Early institutional wallet offerings focused on holding and transferring tokens. But as demand for more complex onchain transaction workflows evolved, so too did Fordefi, according to Dima Kogan, co-founder and CTO. They pointed to Fordefi’s addition of support beyond the Ethereum Virtual Machine (EVM) to Cosmos, Sui and Aptos, Solana, and now Bitcoin.

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“We started hearing about people doing stuff on Bitcoin and — the way I view it, it’s kind of there [were] the applications on Bitcoin itself [such as ordinals], Bitcoin L2s, and then this new domain is people staking in very native way,” Kogan told Blockworks.

Kiln, a platform specializing in providing staking services for various blockchain networks, plans to leverage bitcoin staking to provide fast finality for PoS networks, according to co-founder Ernest Oppetit.

“One of Fordefi’s strengths is their ability to stay at the forefront with new network support,” Oppetit said in a statement.

Fordefi caters to liquid crypto funds, market makers, trading firms and provides white label services for the backend infrastructure of retail-facing firms.

Its policy engine allows clients to set custom transaction rules, ensuring compliance and reducing risks, while the multi-chain browser extension offers a familiar interface for managing assets across various chains.

Babylon’s guarded launch imposed a 1,000 BTC cap on the protocol, a threshold reached within 3 hours of the mainnet launch. In that span, its impact on the Bitcoin network was readily apparent, Leo Zhang, CEO of Alkimiya, a blockspace markets protocol, told Blockworks.

“The Bitcoin fee rate spiked to the stratosphere as Bitcoin LST projects competed for [Babylon] staking allocation,” Zhang said, noting that Alkimiya allows hedging of such fees.

Fordefi is now in the final preparation phase before officially opening bitcoin staking to clients, once the Babylon caps are raised in September, Kogan said.

As to whether traditionally cautious bitcoin holders will flock to the service, Kogan said, “there’s definitely people that want yield on Bitcoin.”

“I guess the nice thing about Bitcoiners is there’s not like a single group — I’m sure there are purists who will look away and discuss — but I think because the Babylon team has a solid foundation, their founders are top-notch, their investors are top-notch,” Kogan said.

“In this sense, I think it could attract the attention of even the more conservative Bitcoin crowd,” he said.

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