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Paradigm leads a $70 million funding round for the Babylon Bitcoin project
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Babylon, a crypto startup co-founded by Stanford University engineering professor David Tse that is trying to bridge the gap between Bitcoin and Ethereum, has raised $70 million in its latest funding round.
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Published May 30, 2024 • 3 minute read
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(Bloomberg) — Babylon, a crypto startup co-founded by Stanford University engineering professor David Tse that is trying to bridge the gap between Bitcoin and Ethereum, has raised $70 million in its latest funding round.
Venture capital firm Paradigm led the round, which also included Polychain and Bullish Capital, the company said Thursday. In December, Babylon raised $18 million from investors including Hack VC and Framework Ventures. Babylon declined to disclose the company’s current valuation and investment setup, citing confidentiality. The proceeds will be used to expand staff as well as research and development, a company representative said.
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The fundraising is the latest sign that the venture capital world’s interest has returned to Bitcoin-focused projects from Ethereum and other blockchains, where it has traditionally been easier to run software such as decentralized financial applications. Cryptocurrency investors and users have become more interested in building the Bitcoin ecosystem following the success of Ordinals, a type of non-fungible token now on the oldest blockchain.
“So Bitcoin is really going through a renaissance in the sense that there is now a new wave of Bitcoin-based projects,” Tse said in an interview. “Historically, Bitcoin was the first blockchain, but over the years the developer community has moved from Bitcoin to new chains… Recently, for multiple reasons, there has been a shift in focus to Bitcoin.”
Interest has also been driven by the approval and launch of Bitcoin exchange-traded funds in the United States earlier this year, as well as the Bitcoin “halving” event in April. The halving reduced by half the so-called mining reward, which is the amount of Bitcoin released by the network to compensate companies known as miners for validating transactions.
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Babylon is a project that will allow Bitcoin to serve as a “staking” asset to secure other blockchains. Staking is industry jargon for the mechanism that makes Ethereum and other so-called proof-of-stake blockchains work. These involve locking cryptocurrency deposits to help validate transactions and secure the network in exchange for rewards paid for doing that work. Bitcoin, on the other hand, is a proof-of-work blockchain that involves miners solving complex puzzles to validate transactions. Babylon aims to allow Bitcoin holders to participate in transaction validation on proof-of-stake networks, earning returns on their otherwise idle Bitcoin.
“You can think of our project as analogous to Ethereum staking, but for Bitcoin,” Tse said.
For Babylon and its investors, the incentive to make Bitcoin a staking asset is great, as many Bitcoin holders have long wanted to generate yield from their Bitcoin. Returns are being generated elsewhere in the digital asset sector, especially after Ethereum completed a key revamp of its network called Merge that transformed the blockchain into a more energy-efficient proof-of-stake setup.
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“In our opinion, in Web3 encryption, a very important value is security,” Tse said. “So it’s this security that drives the decentralized world we’re building. And so what we’re trying to argue is that because Bitcoin is such a large asset, it can kind of provide the level of security for essentially the entire Web3 ecosystem.”
Staking is one of the most profitable corners of the digital asset industry. Among the top three decentralized finance projects by total value of cryptocurrencies sent to the platform, two fall into the staking category, Lido Finance and EigenLayer. According to data tracker DefiLlama, users have sent more than $50 billion in cryptocurrencies to the two projects, partly to generate returns.
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