Crypto exchange Kraken has launched bitcoin BTC staking through a new integration with Babylon, as decentralized finance on BTC picks up.
Babylon is a Bitcoin-native protocol that enables BTC to secure proof-of-stake (PoS) networks without leaving the blockchain.
The service allows Kraken users to stake their bitcoin directly, locking it in a custodial vault on the native chain. The staked bitcoin is then delegated to PoS networks via Babylon, and rewards are paid in BABY, the token of Babylon Genesis, a bitcoin-secured Layer 1, Kraken said.
Bitcoin has historically been used as a store of value and a medium of exchange. The advent of novel security sharing protocols has made BTC staking a third native use case, bitcoin DeFi, for the world’s largest cryptocurrency.
The Bitcoin network is “evolving into a broader decentralized finance ecosystem with the emergence of Bitcoin DeFi,” Binance Research said in a report in March.
Only ~0.8% of the bitcoin supply is currently being used in DeFi, and this presents a large “untapped opportunity,” the report said. Binance, the competing crypto exchange of Kraken, also offers a bitcoin staking opportunity on its platform through Babylon.
“With this launch, clients can earn a return on their BTC while also enabling emerging PoS blockchains to benefit from the economic weight of bitcoin in order to validate transactions and bolster the security of their networks,” said Kraken’s Global Head of Consumer, Mark Greenberg, in the release.
The mechanism is fully on-chain, with staking governed by Bitcoin scripts and cryptographic safeguards to deter malicious behavior.
Users can unstake at any time, with around a 7-day unbonding period.
The crypto exchange first introduced custodial staking in 2019. The bitcoin staking feature is now available across all Kraken platforms.
Read more: Kraken Unveils White-Glove Prime Brokerage Service for Crypto Institutions