Babylon strengthens DeFi functions, introduces "Trustless Bitcoin Vaults" | CoinDesk JAPAN

• Babylon has announced "Trustless Bitcoin Vaults" where Bitcoin can be deposited without the need for a centralized administrator.
• This feature utilizes the latest version of the framework "BitVM3" that realizes smart contracts on the Bitcoin blockchain.
• Lending collateralized by Bitcoin, issuance of stablecoins, and staking on the company's protocol will become possible.

The Bitcoin (BTC) related project Babylon has taken a new step in providing a DeFi (decentralized finance) experience with its $5 billion staking protocol.

"Trustless Bitcoin Vaults" is a system that allows Bitcoin holders to deposit their Bitcoins without relying on a central authority. Details are outlined in the white paper released by Babylon on the 6th.

In DeFi, "trustless vaults" refer to a form of managing and storing digital assets that eliminates the need to trust centralized administrators or intermediaries, achieving security and rules through smart contracts.

Babylon explains that this new mechanism allows for lending backed by Bitcoin, issuance of stablecoins, and even staking within the company's protocol. Users can stake Bitcoin to support the operation of the Proof of Stake (PoS) network and receive the native token "BABY" in return.

This development is part of an effort to leverage the enormous value of Bitcoin to promote DeFi on other blockchains.

Bitcoin, which accounts for over 60% of the total market capitalization of the cryptocurrency market, is more valuable than the sum of all other cryptocurrencies and has the potential to become a stronger "fuel source" for DeFi than any existing cryptocurrency.

Currently, the "bridge" that uses Bitcoin on external blockchains relies on centralized third parties. Moreover, Bitcoin's scripting language does not support smart contracts (there have been attempts by developers). This is a factor that makes it difficult to build a trustless bridge.

Babylon offers an on-chain vault to solve this issue. The stored Bitcoin can be linked to a specific smart contract on an external blockchain.

This system utilizes the latest version of the framework "BitVM" that enables smart contracts on Bitcoin, called "BitVM3." BitVM3 is designed to improve efficiency compared to the previous version and processes most of the calculations off-chain.

According to Babylon, Trustless Bitcoin Vaults are "programmable and withdrawals are only permitted if they can be verified on the Bitcoin blockchain using zero-knowledge proofs for specific smart contracts."

"By combining the appropriate Bitcoin scripts, the need for mutual trust among parties can be eliminated."

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