Babylon Airdrop In-depth Analysis: The Value of Airdrop Participation in the Re-Staking Leader

Author: IceFrog Source: X, @Ice_Frog666666

Babylon, as the leader in the re-staking track, has registered a foundation account tonight, suggesting that TGE is imminent. The following is an in-depth analysis of Babylon's project situation and the value of participating in the airdrop.

I. Basic overview of the project: strong team strength and luxurious investment lineup

1.1 Founding team

The founding team of the project has a strong academic background. Although there are many Chinese faces in the team configuration, the main functional management personnel are mostly overseas. Briefly introduce its main founding team and core management.

• David Tse (co-founder): has a top academic resume, is a member of the National Academy of Engineering of the United States, and a professor at the University of Chicago and Stanford University.

• Mingchao (Fisher) Yu (CTO and co-founder): worked as a lecturer at the Australian National University, and later served as a senior research engineer and principal engineer at Dolby Laboratories

• Dong Xinshu (Chief Strategy Officer): Co-founder of RockX and Zilliqa, and technical partner of the well-known VC IOSG Ventures

• Sankha Banerjee (Chief Protocol Economist): Graduated from MIT and worked at Nibiru.

• Spyros Kekos (Community Leader): Previously served as the community leader of the exchange Gate.io.

In addition to the above personnel, if you look at the configuration of the project management team in detail, you can see that most of the core personnel have at least 3-5 years of relevant experience in the position, or have worked in well-known projects and exchanges. This reflects that the entire Babylon management team has rich experience in blockchain, which will make the operation of the entire project more mature and in line with industry development.

In addition, David Tse, as an academician, has a senior academic background, which also gives the outside world sufficient confidence in its technical strength. At the same time, many core teams have investment backgrounds, which also means that the project has sufficient channels for investment resources, which is also directly reflected in its investment and financing situation.

1.2 Investment and Financing

From the financing round, Babylon went through a full year from the seed round to the A round, but the financing speed and amount from the A round to the main network launch increased rapidly, which shows that in the early development stage, the project still invested in the test network more carefully, and only on this basis did it start the next round of financing. The last round of financing in May 2024 was as high as 70 million, and the total financing scale was 96 million US dollars, which is very impressive in terms of financing scale.

In terms of the investment team, the project investment team is very luxurious, and the investment background is relatively diverse.

As shown in the above figure, in addition to the traditional top VC funds Paradigm and Polychain, exchanges directly include first-tier exchanges such as Binance and OKX.

In terms of individual investors, there are well-known people such as Ajit Tripathi (former ConsenSys fintech partner), Ryan Fang (former Ankr co-founder), and Jia Yaoqi (AltLayer founder).

It can be seen that the financing background is indeed luxurious, covering almost all types and backgrounds of investment funds, which also means that the project's resources are very sufficient.

In summary, the project pays great attention to the team's experience and technical reserves, and the configuration is very comprehensive. It is a high-profile but realistic team setting, which ensures the sustainability of the project in operation and its subsequent long-term development. From the perspective of financing, VCs from various backgrounds have given the project comprehensive support in various resources, which not only shows that the funds are optimistic about the track where the project is located, but also indicates that the project has a high growth space in the future.

Second, the project's advantages: play the security advantages of POW and make BTC flow

There have been many analyses on re-staking and Babylon. In summary, there are actually several consensuses on Babylon, which are also the main advantages of the project.

1. Focus on activating idle assets of the BTC network and promoting the prosperity of the BTC ecosystem

BTC is BTC, and cryptocurrency is cryptocurrency. As BTC accounts for more than half of the assets in the entire currency circle, how to make BTC assets flow and operate has always been a big problem.

For a long time, BTC Holders have been difficult to make BTC move from their wallet accounts for security reasons. After all, under the custody model, the loss of assets caused by the leakage of private keys is a model that no BTC HOLder can bear or accept. They would rather lie down and eat dust than take any risk, especially because the Turing of the BTC main network itself is not complete, and it is impossible to use smart contracts like Ethereum to cross chains safely. Therefore, under this inherent cognition and the defects of the BTC network itself, the asset value of BTC has been highly disproportionate to its utilization rate.

Babylon created a set of trustless self-custody pledge protocols based on this pain point. In layman's terms, under this solution, users' assets are under their own control and can be securely staked. In this process, the pledge uses the computing power security under the POW mechanism on BTC to enhance the security of many other POS chains, so as to achieve multi-party benefits. To achieve the above point, Babylon has its own unique technology, which is also one of the reasons why it is widely recognized in the market.

2. Bitcoin timestamp and pledge agreement are the two pillars of technology

For POS chains, especially POS chains that use the Byzantine fault tolerance mechanism, most of them require 2/3 votes to confirm blocks. Although most POS chains avoid fork attacks through confiscation measures, such attacks are almost difficult to avoid without additional sources of trust.

Therefore, some POS chains will bind security to stakeholders, which makes the entire unstaking time very long. Based on this situation, Babylon's main solution is to migrate the block checkpoints of the entire POS chain to the Bitcoin network. Due to the POW characteristics, if the attacker chooses to fork to attack, it will have a later timestamp in the Bitcoin chain, so the Bitcoin timestamp can effectively avoid remote attacks.

A more vivid metaphor is: the timestamp of the Bitcoin network is a competition record system, where all the finish times of the players are recorded. If a player wants to tamper with his finish time, the Bitcoin network will find that his arrival time is wrong and will refuse; if forcibly tampered, it is necessary to create a fork longer than the Bitcoin network, which is almost impossible to do in terms of cost. Another benefit of this technology is that it can significantly shorten the time for releasing the pledge on the POS chain, and it has stronger anti-censorship.

In the specific pledge agreement, the project adopts remote equity pledge, which means locking the pledged bitcoins in the contract on the Bitcoin chain. When the pledger violates the PoS chain agreement, the bitcoins pledged by the violator will be punished on the Bitcoin chain. The main technology to achieve this is Bitcoin covenant emulation, which is mainly based on the technical improvement of Bitcoin UTXO characteristics. The specific technical details are not expanded. According to the path given on the official website, the main path can be referred to as follows.

As mentioned above, based on the specific rules of Bitcoin Covenant technology, the entire Bitcoin pledge unbinding and penalty reduction can be guaranteed.

3. Across BTC and many other EVM chains, empowering Cosmos ecological security

To some extent, Babylon does not belong to the pledge of encrypted assets, nor is it the characteristic layer network of Eigenlayer to ensure security. It is closer to an innovative use case of the cross-chain equity pledge agreement. In fact, the entire empowerment of the POS chain does not rely on Bitcoin assets, but on the POW computing power mechanism of the Bitcoin network.

Because Babylon's cross-chain communication technology and security sharing come from Cosmos, and the project itself uses the innovation of BTC network's security sharing to greatly promote the Cosmos ecosystem, the Cosmos chain will also actively embrace the security sharing brought by Babylon's innovation to benefit the entire ecosystem.

III. Development Prospects: Potential scale is promising, but there are also many challenges

Babylon is the largest re-staking in the BTC ecosystem. Currently, the locked value exceeds US$5.5 billion, with a total of 56,000 BTC in pledge. Compared with the total amount of 21 million BTC, the overall participation rate is only 0.26%. Even if the participation rate reaches 1%, the overall TVL still has more than 4 times of growth space. From the perspective of the entire upper limit, there is indeed a large room for improvement. This may also be the reason why many investors are willing to provide high amounts of financing.

From another unfavorable aspect, Babylon faces many challenges or difficulties in growth. Both the recognition of the POS chain and the participation of BTC holders require continuous education costs and habit formation. Especially for BTC big holders, their participation will be more cautious.

In addition, a key point that needs to be considered is that after Bitcoin ETFs and listed companies began to reserve Bitcoin one after another, Bitcoin in the market gradually began to transfer to institutions and big holders. If Babylon wants to further increase its participation, how to form a more attractive solution for institutions and big holders still needs to continue to work hard on the innovation and operation of the project.

Fourth, airdrop opportunities and risk analysis: Participate with idle funds, the value of points may have a small surprise

Through the previous analysis, we can see that Babylon has its own unique features in terms of technology, financing and team, and has sufficient upper limits in the long run. As the industry leader, with TGE approaching, for many users who want to take advantage of the airdrop, is it worth participating? Further data analysis is done below.

4.1 Testnet: The official clearly states that there is no incentive, but considering the cost is 0, you can participate appropriately to avoid missing out.

On January 8, the project launched the second testnet. The official documents repeatedly emphasized that there is no incentive for the testnet. Given the cost of 0, you can participate appropriately to avoid missing out. According to the estimated airdrop share, if there is a subsequent airdrop, the early testnet may reach 300-500 US dollars per person.

4.2 Mainnet Points: The annualized rate of return is good, and you can participate if you have idle funds

Currently, if you want to get airdrops, you can only get points through associated projects. Points can be exchanged for airdrops in the future. The main pledged projects are Lorenzo, Solv, etc. Lorenzo occupies 40% of the total pledged amount, and it is also a project with large-scale financing but no token issuance.

According to the Dune panel data, the current total points are about 130 million, with a daily increase of about 1 million points. Assuming TGE within a month, the final points will be about 160 million.

4.3 Points value calculation

Method 1: Divide the total number of points produced daily by the total staked amount (approximately 17.92 per day)

Method 2: Calculate points based on the time distribution of the total supply (approximately 38.35 per day)

Method 3: Simple ratio of Babylon points earned by the protocol to the protocol’s total BTC balance (approximately 31.53 per day)

4.4 Comprehensive Revenue Forecast

Due to Babylon’s high pledge amount and its leading position, the FDV after launch is conservatively estimated to be 3-5 billion USD. There is a precedent for BTC re-pledge agreements to issue coins, and Solv Protocol’s airdrop share is 7.65%. In order to consolidate its leading position, Babylon estimates that the airdrop share will be around 10%, or 300-500 million USD. (Due to the poor market conditions, this is a conservative estimate. The normal valuation should be between 5 and 10 billion US dollars)

Table 1: Value of each point

Table 2: Comparison of monthly pledged BTC rates (BTC price at the time of writing: 98,522 U)

Main airdrop risks: the overall end time is unknown, the airdrop rules are still unclear, and there are certain potential risks.

In general, as a VC project with high financing, exchange fund support, and a high track ceiling, both the maturity of operation and the current progress are relatively smooth, and there is also a high growth space, which lays the foundation for the high market heat after the project TGE. At the same time, based on the limited information currently available, participation at this stage still has a certain cost-effectiveness, and you can participate as needed according to your own situation.