Paradigm Leads $70M Funding For Babylon’s Bitcoin Staking Project

Paradigm leads a $70 million funding round for Babylon, indicating renewed interest from venture capitalists in projects involving bitcoin.

TakeAway Points:

  • Co-founded by David Tse of Stanford, Babylon raised $70 million under the direction of Paradigm to connect the Ethereum and Bitcoin ecosystems.
  • The success of Ordinals NFTs and the most recent adoption of a Bitcoin ETF have sparked venture capitalists’ interest in Bitcoin ventures, as seen by the investment.
  • Babylon wants to make it possible for Bitcoin holders to earn dividends on their otherwise idle assets by enabling staking for proof-of-stake networks.

Babylon Raises $70 Million

Professor David Tse of Stanford University’s engineering department co-founded the cryptocurrency business Babylon, which just completed a $70 million fundraising round. Venture finance firm Paradigm led the round in cryptocurrency, and Polychain finance and Bullish Capital also contributed. This comes after investors, including Framework Ventures and Hack VC, raised $18 million in December. Citing secrecy, Babylon has not revealed its current valuation or the details of the investment deal. The money will go towards hiring more people and advancing the organization’s R&D initiatives.

Interest in Venture Capital Has Changed

The triumphant funding round for Babylon demonstrates a wider reversal in venture capital attention towards projects that centre around Bitcoin. Because Ethereum and other blockchains are easier to implement with software, they have historically been more appealing for decentralised finance (DeFi) applications. But the popularity of Ordinals, a type of Bitcoin-based nonfungible token (NFT), has sparked interest in the Bitcoin ecosystem once again.

“So Bitcoin is kind of really undergoing a renaissance in the sense that now there’s a new wave of projects building on Bitcoin,” said David Tse. 

The legalisation and introduction of Bitcoin exchange-traded funds (ETFs) in the US earlier this year, as well as the April “halving” event that cut the mining reward in half, are further factors contributing to this newfound interest.

The Special Proposition of Babylon

By permitting the use of Bitcoin as a staking asset to protect other blockchains, Babylon seeks to close the gap between Ethereum and Bitcoin. Staking is the practice of locking away bitcoin payments in return for rewards in order to support transaction validation and network security. While Bitcoin uses a proof-of-work approach, Babylon aims to enable users to take part in proof-of-stake networks and earn dividends on their idle cryptocurrency. 

Tse stated, “You can consider our proposal to be similar to Ethereum’s staking, but for Bitcoin.” 

Those who own Bitcoin and have long wanted to get a return on their investments find this project very tempting.

Security and Perils

The use of Bitcoin in staking initiatives has a number of risks, despite its exciting promise. Prior to this, there have been security breaches involving sidechains and bridges, which allow tokens to be transferred across blockchains. 

Dragonfly managing partner Haseeb Qureshi stated, “When you deposit money into a sidechain, you are trusting the sidechain bridge.” 

The $325 million heist from Wormhole, a bridge for Solana, and the $625 million theft from Ronin, a sidechain for Axie Infinity, are two notable exploits. Because of existing technological limitations, sidechains are more fragile and centralised since the Bitcoin network is unable to validate transactions on other blockchains.

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