Babylon's Staking Overhaul: Shifting Bitcoin from Store of Value to DeFi's Workhorse

The Babylon Community has unveiled a new proposal titled "Reduced Inflation and Introduction of Shared Staking," aiming to enhance the utility and security of Bitcoin within decentralized finance (DeFi). The initiative includes a bonus airdrop for Phase-1 BTC stakers who transitioned to Phase-2 by June 15, 2025, and remain staked for at least 100 consecutive days. Eligible participants will receive automatic allocations if they already claimed the Genesis airdrop, while others must sign terms by September 30 to access both rewards. This move is part of Babylon’s broader strategy to incentivize long-term staking participation and bolster network securityBabylon Genesis Bi-Weekly Digest: [September 12^[1].

Babylon’s partnership with Kraken has further expanded Bitcoin staking accessibility, allowing users to stake BTC directly on the Babylon protocol without bridging or wrapping their assets. The integration, which began in June 2025, offers up to 1% APR in $BABY tokens while maintaining on-chain custody of BTC. Over 46,676 BTC (worth approximately $4.89 billion) has been staked through Babylon, marking a significant milestone in Bitcoin’s transition from a store of value to a staking assetKraken Bitcoin Staking: New Babylon Protocol^[2]. Kraken’s adoption of the protocol underscores Babylon’s growing institutional traction and its role in mainstreaming BTC staking.

Technical updates include the activation of $BABY staking on the mainnet dashboard, enabling token holders to participate in governance and BTCFi security. Additionally, Persistence DEX’s integration of multi-swap on Babylon Genesis allows users to exchange tokens like WBTC and XPRT in a single transaction, enhancing liquidity. The Babylon team also emphasized Finality Providers (FPs) as critical infrastructure, hosting educational sessions to guide stakers in selecting reliable FPs. These efforts aim to strengthen the network’s security and user educationBabylon Genesis Bi-Weekly Digest: [September 12^[1].

Community engagement remains a focal point, with Babylon’s presence at high-profile events such as Korea Blockchain Week (KBW) and the Bitcoin Treasuries Unconference. At KBW, the team highlighted BTCFi’s potential through panels on institutional adoption and dApp development, while the Bitcoin Night event in Seoul featured discussions on trustless Bitcoin vaults and cross-ecosystem collaboration. Such initiatives position Babylon as a leader in BTCFi thought leadership, fostering partnerships with projects like Lombard, Blockdaemon, and StacksBabylon Genesis Bi-Weekly Digest: [September 12^[1].

Looking ahead, Babylon’s 2025 roadmap includes the launch of Bitcoin multi-staking and an Ethereum Virtual Machine (EVM) mainnet. Multi-staking, set to debut on testnets in summer 2025, will enable BTC holders to secure multiple PoS networks simultaneously, maximizing asset utility. The EVM integration will allow developers to build Bitcoin-native DeFi applications, such as lending protocols and stablecoins. By Q4 2025, Babylon plans to finalize RPC upgrades and cross-chain bridges with IBC and LayerZero, further solidifying its position as a BTCFi hub.

The proposal’s reduced inflation mechanism aligns with Babylon’s goal to balance tokenomics and network growth. By introducing shared staking, the protocol aims to distribute rewards more equitably while mitigating centralization risks. Analysts note that these changes could drive demand for BTC staking, particularly as institutional interest in Bitcoin’s utility expands. However, challenges such as regulatory scrutiny and technical scalability remain critical hurdles.