Bringing Bitcoin security to the Cosmos Hub with Babylon

With Interchain Security, the Cosmos Hub has been able to provide a substantial amount of proof of stake security to its consumer chains. But how can we push this even further? What if the Cosmos Hub could act as a security aggregator- bringing together billions of dollars of security from multiple assets, a battle tested validator set, and innovative consumer chains? This is what this proposed Babylon x Cosmos Hub integration is setting in motion. Babylon’s Bitcoin staking technology will allow bitcoin holders to stake their bitcoins to secure Cosmos Hub ICS consumer chains. This will: • Give ICS consumer chains access to hundreds of billions of dollars in potential security. • Solidify the Cosmos Hub’s position as a security aggregator, bringing together staked assets from many sources, a battle tested validator set, and innovative consumer chains. • Onboard bitcoin holders to Cosmos when they claim their staking rewards. How will it work? If it is approved by Hub governance, security aggregation using ICS and Babylon will work with a CometBFT extension which will be added to both the Cosmos Hub blockchain and all consumer chains. This will allow the Babylon scripts…

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Groundbreaking initiative.

Just saw this on Twitter! Super exciting news

cosmos hub BD upping their game. love to see it

I think its a well needed primitive Jehan. ICS is struggling on the BD side and given Ethos, Picasso, and persistence are working on restaking, the grand daddy of them all choosing to use ICS gives me hope. This could mark a new direction for the hub. Great work!

It’s exciting to see a collaboration with Babylon. However, I’m curious about the sustainability of this initiative within the existing economic framework, especially considering that current revenues seem insufficient to cover the operational costs of validators. This scenario appears to potentially fragment an already limited revenue stream even further. From my perspective, i do not see any direct advantages for ATOM holders. A potential improvement could be to explore a model where consumers pay for Bitcoin security using ATOM, which might offer a more tangible benefit and align more closely with the interests of ATOM stakeholders.

i’d also be a little more cautious about added frictions to staking with things like onboarding quests especially with the bitcoin community. It’s important to ensure that such initiatives do not inadvertently discourage participation.

Would also like to know the quests as well.

this could be a gamechanger or am i wrong?

Hello, the idea seems attractive, however regarding the part: “Consumer chains will be able to select how much of their security budget goes to ATOM vs Bitcoin” , will there be a maximum percentage attributable to bitcoin security? why would they choose atom security? (at first probably out of habit, but gradually…?)

LitBit: It’s exciting to see a collaboration with Babylon. However, I’m curious about the sustainability of this initiative within the existing economic framework, especially considering that current revenues seem insufficient to cover the operational costs of validators. This scenario appears to potentially fragment an already limited revenue stream even further. From my perspective, i do not see any direct advantages for ATOM holders. A potential improvement could be to explore a model where consumers pay for Bitcoin security using ATOM, which might offer a more tangible benefit and align more closely with the interests of ATOM stakeholders. Cygne: Hello, the idea seems attractive, however regarding the part: “Consumer chains will be able to select how much of their security budget goes to ATOM vs Bitcoin” , will there be a maximum percentage attributable to bitcoin security? why would they choose atom security? (at first probably out of habit, but gradually…?) Things are still pretty open as to how we do this. Currently, as the post says, we think there could be a tax for rewards going to BTC. So even if a consumer chain got 100% of security from BTC,…

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The integration of Babylon’s Bitcoin staking technology into the Cosmos Hub, as outlined in your proposal, is a revolutionary step towards enhancing blockchain security and interconnectivity. The ambition to bridge Bitcoin with the Cosmos ecosystem is a bold use case. By tapping into Bitcoin’s market capitalization and its community, the Cosmos Hub could significantly strengthen its position as a security aggregator. This initiative could definitely enrich the Cosmos ecosystem, potentially attracting a new wave of users and investors. However, several concerns require consideration, especially when we considered the typical Bitcoin holder’s mindset and the inherent risks associated with staking their precious BTC. For example: • Smart Contract Risks : The reliance on smart contracts—or Babylon scripts—for this integration introduces a layer of technical complexity that could be a potential vector for vulnerabilities. Given Bitcoin’s design as a secure, decentralized currency, many Bitcoin holders are understandably wary of any mechanism that might expose their holdings to smart contract vulnerabilities. How can we ensure the absolute security of these scripts against…

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This is an innovation, but I think there are a lot of doubts This is like sharing the staking interests of atoms with all chains Does DEFI multi-collateralization have security spiral risks? Luna designed a 20% high profit margin game mechanism, which was unsustainable, so it eventually went bankrupt. I don’t want the knock-on effects to be felt when risks arise What are the benefits to ATOM stakers? Lose big rewards in exchange for small dust. If you use btc eth ada bnb sol xrp to earn income from the atom consumer chain, although you can use this method to introduce new people, it means that ATOM pledgers are reducing their profits. ATOM’s own economic design issues, relying on external forces may lead to a worse situation. The reduction in profits will cause ATOM holders to lose confidence? If ATOM needs to rely on currencies other than Bitcoin to increase the security of the consumption chain That is actually a blow to the confidence of the consumer chain. If ATOM is useful enough, why bother using others? As a cross-chain currency, ATOM is of no use at all. ATOM is not needed across chains. This is the key to its lack of power. This just confirms ATOM’s…

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I have two concerns in case this proposal is passed and there is a significant amount of BTC staked:

1. What is in for ATOM? ATOM would have to share its Staking APR with BTC and in return may gain increased ICS fees. Out of economical perspective, is this a good trade-off?

2. What can be done to prevent BTC Stakers from dominating the governance of the Cosmos Hub? If BTC becomes the majority of the staked tokens, what will stop them from proposing and passing changes that are detrimental to ATOM and the Cosmos vision?

This is really huge! Leveraging security introducing the less volatile and most capitalized crypto asset into IBC!

Could you please stop using GPT for writing in this forum?

• 4 Analysis show that more than 50% of this message are generated by AI.

If you want to appear smart, use your own brain to create concise and direct messages.

I strongly believe that the schelling point for paying BTC stakers is ATOM.

I think the Cosmos Hub needs to focus on communicating one asset as yield to BTC stakers and that asset should be ATOM

These are my original thoughts, spell checked, punctuation checked, grammar checked, style checked, and formatted using Grammerly. Which last time I checked was not illegal to use.

their staked bitcoin will add to that validator’s power on the Hub

by “power to the hub” do you mean staked btc will increase a validators vote power right?

Super grateful for all involved. Love the idea. However, ATOM as money needs to be top priority IMO. Thats what the tokenomics governance chaos has been all about. I would argue no more than 50% of staking rewards should be paid in BTC or anything other than ATOM.

Additionally, I listened to the Staking Rewards Summit and if i recall correctly, BTC staked with Babylon only yields like 3 or 3.5%. I wouldn’t put my BTC at risk for only 3% yield and think other BTC holders would feel the same way, if they’d even consider staking their BTC at all. I suppose the yield can be boosted by paying out in ATOM.

Really enjoyed the Twitter spaces. For those who didn’t hear it: https://twitter.com/cosmoshub/status/1757447297535762462?t=SHKY1kL490S8lDFGfLaWZg&s=19

Context: This is clearly a paradigm shift proposition. We are so grateful to have such innovative mindsets in the broader Cosmos community and to see that the Hub is still acting as a gravitational force for the best minds. Additionally, we want to emphasize the radical change perceived in this initial post compared to previous shifts in the hub’s history (such as Atom 2.0, etc.). The author doesn’t advocate a global vision but rather exposes the idea and potential high-level design choices, allowing the community to express feelings and make suggestions. In our humble opinion, this approach is much healthier. Analysis: Regarding the proposition itself, we think this is clearly an interesting topic that merits a lot of attention. On the contrary, we believe simple questions require simple answers. Should the Hub install the `Babylon's Comet Extension` ? The answer is YES. Refusing this would simply mean the Hub falling behind competition in the Security as a Service business (SaaS). Design Choices: On the design side, a minimal tax from the Hub seems like a reasonable rationale to explore. It is worth to mention that validators will already take a minimum 5% fee (and…

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The Babylon Team would like to express our gratitude for the various proposals and thoughts presented, focusing on the strategic alignment between Babylon and Cosmos Hub. We are actively following the proposals and thoughts and currently working to create a detailed roadmap for Babylon and Cosmos Hub to work together. Our initial thoughts and analysis were categorized into two primary segments: Economic Alignment and Narrative Alignment . • Economic alignment - What are the mutual benefits for Cosmos Hub and Babylon ? • Narrative alignment - Are we (Babylon & Cosmos Hub) planning to work on siloed business models or integrated business models ? While working with Jehan and his team, the objective was to first get the community’s ideas into what are the best potential opportunities between Cosmos Hub and Babylon. The initial ideas was to activate the Hub in brainstorming and debating us about the various next steps • Babylon brings Bitcoin (external capital) for the first time to complement the native token of PoS chains to bootstrap securities, starting with Cosmos and then the broader PoS economy. Babylon is trying to understand how best the BBN token should be used…

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Merging Babylon’s Bitcoin staking tech with the Cosmos Hub is an interesting idea that looks harmless at face value. Still, when you take a deeper dive, I don’t see any significant economic benefits to Atom Stakers. The proposal has not clearly articulated the direct economic benefits for Atom stakers. While there may be purely speculative indirect benefits, such as increased ecosystem security and potential onboarding of new users, how does this proposal directly translate into tangible economic advantages for Atom stakers. What’s in It for Atom Holders? • Rewards Might Get Thinner : First off, there’s a worry that Atom holders might end up getting less out of the deal. With Babylon bringing Bitcoin into the mix, the rewards that used to go mainly to Atom holders will have to be shared with more Stakers from outside Cosmos. This will mean Atom holders will experience a net decrease in rewards for keeping the network safe. This is known as dilution. • Could Atom Lose Its Shine? : Atom has a unique role in making the Cosmos network secure and rewarding its holders. If we start mixing in Bitcoin, then this will dilute Atom’s value. People might start questioning if…

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Babylon as a consumer chain is a strong YES
Paying Bitcoin stakers in ATOM - strong YES

Why? What is your reasoning? Help me understand.

jtremback:

For many of them it may be their first experience on a blockchain other than Bitcoin.

but then you may not wanna flood them with CC tokens. I don’t think that is a nice UX. Bitcoin in and 10s of tokens as rewards? Seems a bit overwhelming, especially when they are worth close to nothing.

I view both as core Cosmos Hub offerings that align with the “port city” vision - infra services for other chains. Commerce in the ATOM economic zone should happen in ATOM as it greatly reduces fx costs (the same reason why every multi-national corp wants to transact in US dollars instead of handling a portfolio of 50 currencies and their quite pricey foreign exchange costs)

You’re making a very general claim that could apply to any proposal, which doesn’t really dig into what’s good or bad about this specific idea. I’m not totally sold on why using Babylon’s way of staking BTC through ICS is something that would benefit Atom Stakers and the Atom Economic Zone (AEZ). Sure, it’s a “Use Case” that can be implemented as part of ICS, but why? Is it going to improve ICS? There are already like 25 liquidity pools (LPs) on Osmosis that work with WBTC, holding around $8 million USD in liquidity. This makes me think those looking to earn some extra yield from their BTC are probably already using these options. Are the staking returns on BTC going to have to be higher than the yield from the LP’s in order to incentivize BTC Stakers? For what benefits? The vision for the Cosmos Hub as a “port city” envisions it as a hub for trade, exchanges, and interactions, where the AEZ is central. In this vision, Atom is meant to be the main currency that facilitates transactions and ensures Interchain Security. In my opinion, Atom should be exclusively positioned as the “ONLY” Cosmos “global reserve currency,” minimizing friction across the network. This vision…

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What you are overlooking is a fundamental understanding of security. Bitcoin is not just another token. This is a token backed by massive amounts of energy. By contrast, every proof-of-stake token is backed by social consensus. These are fundamentally very different types of security arrangements for monetary value. At the end of the day, the 180 validators of Cosmos can collude with each other and steal everybody else’s money. That’s not possible to do with Bitcoin where you have to generate energy to do the same. Overlaying the social consensus security with the energy security of Bitcoin is a fortification of the Cosmos Hub of massive proportions. While you trust the Hub and its validators (and so do I) hardly anybody else does. That is why the TVL numbers in Cosmos are so small. Ethereum has TVL in the tens of billions, not a couple of piddly millions. In order for Cosmos to grow as a technology and as a chain to the billion person adoption level, its current security offering is insufficient. Augmenting Cosmos Hub with Bitcoin security and making it the premier Aggregated Security provider for the interchain is a cornerstone capability. It will also make ATOM investable for…

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Thanks for your detailed response. I am no longer going to comment on any proposals. I only just became aware of the upcoming hard fork and realized that all this effort is probably a waste of my time. Although, I agree that most of what you say is correct, I don’t think this proposal is going to play out the way it’s described. If it does then that’s awesome, then everyone wins. Good luck to everyone.

Yes, the Cosmos Hub (ATOM) is moving in a different direction than Jae Kwon’s original vision. There is now enough differences to where he is creating a different IBC hub with which to implement his original vision - Atom One (ATONE). The last thing anybody in Cosmos wants is for people to self-censor. Please feel free to post your concerns at any time. You raised good questions and by answering your questions other people get more clarity as well about what’s going on.

There is several caveats to this. 1 Bitcoin not being the shiny, glittery object it is. I.e. its decentralization level influences its POW security precautions.

Great module to have in the SDK. Unsure that the hub (at this point) will have any benefit from this whatsoever apart from “omg, its working”

sbneo2022: Our initial thoughts and analysis were categorized into two primary segments: Economic Alignment and Narrative Alignment . • Economic alignment - What are the mutual benefits for Cosmos Hub and Babylon ? • Narrative alignment - Are we (Babylon & Cosmos Hub) planning to work on siloed business models or integrated business models ? Dear @sbneo2022 , there’s actually a lot more to this story of mutual benefits between Babylon and the AEZ than meets the eye. Among those, we have listed a few in our recent coverage of the project we made as part of our educational mandate towards our delegators: • Babylon as a de-facto bitcoin oracle for the AEZ (and the whole Cosmos by extension via interchain queries) which critical role will likely require the best security guarantees to be accepted as such. Using the well established reputation of the Hub validators as well as the already liquid and decentralized supply of ATOMs makes it by far the best offering in the Cosmos today. • The Capital/Currency duality problem and the complementary role that Bitcoin & ATOM can play to achieve to this balance. As quoted from the following video: Like Yng and Yang, BTC…

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Yeah, well the way this thing works is that blocks get a Bitcoin timestamp which means it becomes very difficult for an attacker to split the chain. Which means you need to pay substantially less in inflation to secure the chain. Right now ATOM has a problem in that its inflation has to be higher regardless of demand for the token in order to secure the network. That means number go down. With Bitcoin timestamping, inflation can be lowered to a level where it meets demand for token or lowered below. In other words implementing a 0-10% inflation range with a number go up token becomes possible.

With Babylon, ATOM monetary policy becomes guided by the desires of tokenholders instead of fundamental network security considerations. Then we get to a point where Bitcoin is like the Gold in the Federal reserve balance sheet and ATOM is the Treasury bonds where the interest rate is set by the Fed board. The Fed board in this case is ATOM tokenholders.

Few Questions and ideas from my side:

1. Why $BTC staker can unbond their token quickly while $ATOM stakers has to wait 21 days? If they complement each other, the unbonding time should be equal

2. why BTC stakers have voting power on cosmos hub?

3. Reward for BTC stakers should be decide by governance instead of decided by validators individually, otherwise if a validator decided to give 100% of reward to BTC, BTC can replace ATOM completely and this make me think why not just invest in BTC which can do everything ATOM does without the inflation!

Optimizations may occur, the difference in unbonding times between BTC stakers and ATOM stakers is due to the unique security mechanisms of their respective blockchain networks. This difference is reasonable, considering the varying unbonding periods across different platforms. More harmonized unbonding process. This could involve adjusting the unbonding period for BTC stakers to be closer to that of ATOM stakers, while still maintaining the security of both networks. BTC Stakers’ Voting Power : Currently, BTC stakers do not have direct voting power on the Cosmos Hub. Validators’ voting power is determined by the amount of ATOM tokens they have staked. Although adding Bitcoin stakes via Babylon does not grant direct voting rights to BTC stakers, there might be future developments that allow for a more balanced representation of both ATOM and BTC stakers in the Cosmos Hub’s consensus algorithm. This could involve exploring alternative methods for determining voting power or incorporating BTC staking as a factor in the validators’ influence. Reward Allocation Decisions : The governance process may evolve to include more diverse perspectives and better representation of…

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Looks very interesting!

Eth denver from the official channel.

This is an insightful answer.

I disagree than ATOM has an inflation issue at this stage

It looks interesting, I have a couple of questions initially.

1- When a BTC holders stake with Cosmos validator, will they get the Native Atom staking rewards? if yes at what rate? If not, Why would BTC holder stake their BTC because ICS in the last year hasn’t earned an attractive yield for validators or delegators?

2- Will the BTC staker have the right to vote on HUB’s governance proposals? I think that isn’t the case but if it is only 2% of BTC is enough to take over the HUB. (1BTC = 3000 Atom)

BTC will not have the ability to vote in Atom governance.

Thank you, we are undecided on the NAtive Atom rewards for BTC staking, right?

From our understanding, we would take this quote at the end of the topic:

jtremback:

So to sum it up: \

• Babylon’s Comet extension will be installed on the Cosmos Hub and all its consumer chains.
• Bitcoin holders will be able to delegate to Cosmos Hub validators, and will earn rewards.
• Consumer chains will be able to select how much of their security budget goes to ATOM vs Bitcoin.

This economy will be driven by the consumer chains’ willingness to use this security feature or not. Those deciding to use it will have to decide how much portion of their reward “bucket” they want to allocate. For example this could be 75-15-10% between the chain, Cosmos Hub, and BTC stakers. Noting that if the final implementation decides to pay BTC holders in ATOM, a swap to atom will have to be performed from the rewards into ATOM.

We should also note that a small tax will be deducted from BTC Stakers’ share to compensate for the Hub’s services.

Weve recently launched a vault between interlay and bitcoin on Polkadot. I would defo suggest to see what they have in that direction open sourced already

Thank for you @serejandmyself for the vault. Here is my current view , it can change with market condition later. Let say , imagine a example to illustrate few use cases : If you are a Ukrainian businessman seeking to protect your wealth because the front Line’s moving closer to you do you buy property in London that you’re never going to live in that you’re going to have to maintain and you’ve got friction getting rid of it and so on do you buy a bunch of gold bars you’ve got to store in a vault um proof kyc , Etc do you buy a home in Monaco, a factory unit in Nevada or do you just go and buy some Bitcoin on the basis that you can always offload the Bitcoin and receive any other currency later. While Bitcoin has been viewed as rigid, emerging technologies like tap root upgrades and rollups could unlock new avenues for developers to build innovative applications on the protocol. This shift in utility could drive increased institutional and retail demand. Limitations of previous Bitcoin scaling solutions, like lightning’s channel rebalancing challenges, have created a void that rollup-based approaches seem poised to fill. These layer-2 constructions could facilitate…

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jtremback:

With Interchain Security, the Cosmos Hub has been able to provide a substantial amount of proof of stake security to its consumer chains. But how can we push this even further? What if the Cosmos Hub could act as a security aggregator- bringing together billions of dollars of security from multiple assets, a battle tested validator set, and innovative consumer chains?

1. The unbonding period is decided by ATOM governance.
2. BTC stakers have voting power, only if they have ATOM staked
3. The reward mechanism would be decided by ATOM governance.

Greetings ! During Babylon’s presentation of their project, an intriguing possibility was highlighted: the potential to reduce the unbonding period for ATOM stakers significantly. While the exact duration escapes my memory (I believe it was mentioned to be either 1 day or 1 hour), this proposal raises some pertinent considerations. Reducing the unbonding period to such a short timeframe may pose risks for average users. A cursory glance at online forums like Reddit reveals numerous instances of wallet hacking and subsequent asset unstaking. The current 21-day unbonding period serves as a buffer, providing affected individuals ample time to seek assistance from the community, such as the cosmosrescue team, and remedy the situation. However, with a drastically reduced unbonding period, there arises the possibility of unsuspecting users falling victim to rapid asset depletion before even realizing the breach. One potential solution to mitigate these concerns could be to offer stakers the option to choose a longer unbonding period. This customizable feature not only empowers users to tailor their staking experience to their preferences but also introduces incentives, as opting…

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Any updates on this frontier?
Im very excited about this collab and eager to know eta for this? Q2?

I prefer to think of the long unbonding period as a commitment to MY own security.

The desire to cut the unbonding period comes from high frequency trading professional investors who want to be able to move money around without waiting in order to reduce their financial risk. For them liquid staking was created.

For retail users, 2 or 3 week unbonding period gives them ample ability to discover if their wallet has been tampered with and cancel the unbonding transactions thus thwarting hackers. I think once people understand that the time lock actually enhances the security of their holdings, they won’t mind it. By comparison, a US treasury is locked for minimum 4 weeks. 4 week lockup in tradfi is considered “cash”.

Take note that at present, a hacker could swiftly access staked funds using LSM functionality, effectively leaving the user with an empty account. However, users can take action to disable LSM on their account, with reactivation requiring a 21-day waiting period. This is currently the most secure method to prevent fund leakage. We’re preparing a detailed security guide to outline this process. Please note that wallet providers do not currently support this type of transaction, but we’re actively working to change this and will keep the community updated.