Unlocking 21 Million Bitcoin to Secure the Decentralised Economy - TOKEN2049 Singapore 2023

all right so can people hear me all right good morning so yeah so today I want to talk about a new use case of Bitcoin that we're developing and uh we're all very excited about the Renaissance of Bitcoin like order knows project and this is another use case to follow that Renaissance so let me explain this use case um a little bit history of course Bitcoin is the first blockchain first blockchain in the history invented by Nakamoto it's a proof of work blockchain that means it's secured by work by hashing uh since then many new blockchains have developed and all these new blockchains most of them the new ones are proof of stick blockchains proof of stake blockchains and uh so yeah so now we have an interesting dichotomy been this uh web free economy is we have Bitcoin on the one side which is 50 of the asset and then we have proof of stake on the other side the other 50 of the crypto asset these two parts of the economy are somewhat isolated as we all know Bitcoin has no smart contract and so it's main use case is store of value and so there has been relatively little interaction between Bitcoin and the rest of the ecosystem whereby between proof of stick chain there are a lot of bridging and interoperability and so forth now so we've been thinking because proof of stick because Bitcoin has this isolation is there a way to connect better Bitcoin with the rest of the ecosystem so the idea is the following so if you think about the proof of stake blockchains the proof of sex economy the basis of this economy is sticking okay so sticking is essentially using Capital to provide security as we know in web 3 the core of the web series is security so therefore we need Capital now in current day blockchains uh the capital is typically provided by the native asset of the blockchain and typically when you bootstrap a blockchain this native asset is small the market cap is more and so you have to pay a lot of inflation to acquire this security so it is a huge cost to the blockchain and it deters it away distracted away from building interesting applications so now so the idea is that Bitcoin although it's isolated it is still 500 billion asset huge huge asset pool and so our idea is to use this as a pool and convert it into a staking asset and use it to provide a source of capital to help secure proof of stake systems so here we give some examples of proof-of-stick blockchains but you can imagine many many new blockchains new layer 2 new decentralized sequencer new middleware and they all can enjoy this huge sticking asset Bitcoin and so paradoxically Bitcoin has proven work but its asset is very decentralized and so as a staking asset is actually very powerful so first of all it is unencumbered so it is not used to secure its own chain so therefore when you use it to secure all the chains it has lack of a less of an over leveraged issue two is relatively idle most of this Bitcoin is actually store of value right now earning very little yield and so therefore the staking opportunity would be rather attractive to many of these Bitcoin holders number three is compared to other crypto assets there's less volatile because it's a very old asset and volatility is bad for security and so the less volatility the better for security and Bitcoin holders tend to hold this asset for a long time and so that's also a good thing for stability of staking because you want people to hold the asset for a long time and you can use it to stake for a long time and of course it's decentralized the most decentralized asset so if you combine it then we have this nice picture is Bitcoin sticking where it's a Marketplace and on the left hand side are Bitcoin holders this could be whales these could be Bitcoin miners this could be small individual retail Bitcoin holders all of them all of them could participate and contribute the Bitcoin capital into a sticking opportunity for the proof of State economy on the right hand side so from the left hand side right hand side we have security and from the right hands and left hands with yield and from the Bitcoin holder point of view they have the opportunity to hold Bitcoin which is probably one of the most attractive crypto asset you've not the most attractive and at the same time has an opportunity to earn Alcorn yield by providing security to the chains to the middleware that they are interested in and this provides an upside on the right hand side uh change the proof of stick systems have the benefit of a very large pool of potentially cheaper more decentralized stable source of security so that they can focus on developing their ecosystem their application so that is the marketplace that we want to create using this concept of Bitcoin stacking and what we're building right now is a Bitcoin sticking protocol a Bitcoin sticking protocol that enables these two Marketplace for the voters and for the chains to participate in now from the point of view of the two sides they are very in one very important thing is security the Bitcoin holders are very conservative typically about the Bitcoin and so this protocol has been very secure on the other side from the point we have to change this should be a proper sticking asset and therefore provide a appropriate collateral to secure the chain and so the protocol that we built uh in this project called Babylon bitcoin's taking protocol has two property one is that it's a true collateral so it provides full slashable safety for approval stack chains so in proof of stick change a very important property of security is that the staking asset should be a collateral such that if there's any bad behavior on the part of the validator the collateral can be slashed very very important property and we achieve that and two is we achieve trustless sticking which basically says that the Bitcoin hurdles does not need to bridge or send the asset to any centralized custodial and this distinguish our solution with typical bridging of Bitcoin because bridging a Bitcoin needs bridging or needs essential centers custodial like big gold and our protocol is completely trustless and self-custodial self-custodial now if you think about it it's pretty remarkable that we can achieve this because Bitcoin actually doesn't have any smart contract to do any intelligence and yet we can achieve these real properties together so when I told people about this they don't really believe me that we can actually do this they think I'm bullshitting and so therefore I would like to spend three minutes instead of going through a little bit more detail on how the protocol works from the point of view of the Bitcoin sticker all right so here's the Bitcoin chain now the Bitcoin sticker Alice so every cryptographic protocol has to be has to have an ALICE okay so this is Alice here Alice's sticker she has one Bitcoin and she wants to stick it to secure her favorite proof of stick chain her favorite proof of stick chain and uh so what he she does is she sends the transaction to the Bitcoin chain to initiate a second contract and in this taking contract Alice can the Bitcoin can uh go through a so-called time lock time lock of a certain duration say six months time and stick in six months or Alice will burn the Bitcoin send it into a burn address okay so these are the two possible the only two possible outcome of this Bitcoin notice this is self-custodial so Alice have the private key have the private key to this Bitcoin all right so why are there these two strange options well one is that you want to lock the Bitcoin into a contract for six months that's natural for staking two is very strange because why would Alice burn the Bitcoin herself that's really weird right that's her Bitcoin so as I explained the protocol we'll see so in any protocol security protocol there are usually there are two paths one is a happy path which means that the balance will now start validating the proof of stake chain without the proof of stake chain and after six months LS can now unstick and obtain reward so this is a happy path now in the case of unhappiness that is Alice suddenly becomes devil and starts to attack the chain okay so this is the time in which we have to slash LS Bitcoin now Alice is self-custodial so how can Alice how can we take the Bitcoin away from Alice so that sounds weird so what we do here is the following okay so to connect Alice validation to Alice contract on the Bitcoin chain will require that Alice uses the same private key that controls the Bitcoin to sign blocks to sign blocks on the validate as a validator of the proof of stick chain okay so the key the private key is the same so that couples the two systems together in case of bad behavior like double sign like double sign two blocks then what we could do is that in our protocol we use a very very special type of signature scheme which have the property that when you assign two blocks at the same height in the blockchain then Alice key will be extractable by anybody who observed these two blocks and observed the two signatures so this is a so-called one-time extractable signature and once it's extracted then anybody can now provide this as a fraud proof to the Bitcoin chain send a transaction and burn Alice's Bitcoin by spending it using the private key so this is how slashing is enforced and this is how we prevent Alice from double sounding blocks okay and uh so it has we have also other interesting properties for example we could achieve fast and bonding so I think a speaker in the early talk says that in ethereum unbonding can take many many weeks many many weeks using a special protocol what we call a timestamping protocol we can actually make an unbounding process to save three days so every time you request an unbonding you can do it in three days and uh one thing very interesting about protocol is that it can actually work in conjunction to almost any proof of Stack protocol that you have okay so we know that for example many many different blockchains have many many different proof of stake protocol and what our design is a modular design what we call a finality Gadget which allows us to add this special signature on top of any existing protocol and achieve this Bitcoin sticking functionality so this primitive now can be applied to many many different types of protocol in many many different types of ecosystem so we think that this concept is pretty powerful okay yeah so um so the architecture of the system is the following all right so Bitcoin Bitcoin is the source of security the proof of stake change is where the validators uses our special signatures to sign blocks we want to coordinate the system so we break down the system architecture into two parts on the left hand side we have on the right hand side we have the proof of stick chain and we call this the data plane so this comes from web 2 language of networking so the data plane is when the values are validating blocks the data okay Babylon runs a control plane or as a control plane that helps to coordinate these validators with Bitcoin because Bitcoin is where the sticking asset is held so does the coronation between the Bitcoin and the proof of Stack chains now why do we need this coordination well one very important coordination function is to coordinate between the two chains the Bitcoin chain and the proof of stick chain in terms of time time why do I have recorded in terms of time because the sticking asset is maintained on the Bitcoin chain so on the Bitcoin chain we keep track of who has how many sticks and when they're unborn and when they join the system on the approval stick side we have to control which values can vote and how much voting power they have so we need to coordinate so when a sticker unborns we need to remove the voting power from the validator ETC so to do that we have to coordinate in terms of time and we do that through a technology called time stamping and so Babylon offers this technology called Bitcoin time stamping which basically uses a Time stamping method to coordinate between the proof of stick blockchain and Bitcoin and we already built this time stamping actually and our initial ecosystem for proof of stick chain is the cosmos ecosystem so in the past few months in the six months five months ago we launched this timestamping test net worth 31 Cosmos chains or time stamped to bitcoin through Babylon so Babylon itself is a cosmos sdgk chain and all these changes like osmosis say Akash they're all time stamping to Babylon and Babylon is time stamping to bitcoin to enable all of these blockchains to get timestamp you may ask well why don't they each all of them directly times them to bitcoin why do we need Babylon and the reason is because Babylon is a aggregator of timestamp and this allows us to scale up the timestamping process and enables Bitcoin and every one of these proof of section to be coordinated in time through Babylon all right and so this is what we built and in the next step of our roadmap we will overlay the Bitcoin time stamping onto this test net and we plan to launch this test net in a few months okay so my time has come to end but our final goal our vision a long-term vision of this project is to use Bitcoin sticking as one method to unify the Bitcoin and the proof of State economy so that we don't have this dichotomy anymore Bitcoin is a very powerful asset and this asset will help us provide injection of security liquidity to the proof of State economy so if you want to find out more about this work you can take a look at the light paper uh uh on our website and these are all the co-authors on this work thank you very much [Applause]