Nomic is introducing stBTC, a Bitcoin Liquid Staking Token powered by Babylon, a fellow Cosmos chain that provides a Bitcoin staking protocol. stBTC uses nBTC, staking the underlying BTC via Babylon to provide proof-of-stake security to other chains in exchange for altcoin rewards.
As the two core Bitcoin projects in the Cosmos ecosystem, Nomic and Babylon’s collaboration marks a major step towards bringing DeFi to Bitcoin.
Bitcoin Staking
Babylon’s Bitcoin staking protocol works by staking directly on the Bitcoin blockchain, making use of a cryptographic primitive called extractable one-time signatures (EOTS) to allow the BTC stake to be slashed if a validator commits a double-sign. To stake the BTC, a user must create a Babylon staking transaction which includes an output that can be spent by a slashing transaction if the validator needs to be penalized, or otherwise can be reclaimed by the user after a certain amount of time (e.g. 7 days) if no slashing occurred.
To combine this with Nomic, whenever users lock their nBTC into the Nomic BTC staking pool to mint stBTC, the network will automatically move funds from the network BTC reserve into a Babylon staking UTXO. After this point, the users’ BTC is providing security to one or multiple consumer chains, delegating to validators selected by governance. Eventually, the network will reclaim this BTC to either return it as nBTC to unbonding users, or will renew the staking position by moving it into an updated staking UTXO.
stBTC
Users can mint stBTC with nBTC (obtained either by depositing BTC into Nomic or acquiring nBTC elsewhere) by locking it in the BTC staking pool in the Nomic app. At this point, users can hold their stBTC to accrue rewards denominated in various ecosystem tokens, paid out by any network which opts into the use of staked Bitcoin security — much like the Cosmos Interchain Security model.
Even though the nBTC and underlying BTC are bonded in this staking position, users may transfer or sell their stBTC at any point since it is a fully liquid token. Users may also burn stBTC at any time to unbond and receive an equivalent amount of nBTC. Unbonding may take up to 7 days, but may sometimes happen faster.
Note that there are risks just like any other staking mechanism — if the validators commit a double-sign, stBTC may potentially lose value.
Testnet
stBTC is active in a special testnet and is available for users to experience these features’ functionality and benefits before their official mainnet release.
This testnet uses Babylon’s latest Bitcoin staking testnet which uses Signet BTC. Signet BTC can be deposited into Nomic for testnet nBTC and then staked for stBTC at stbtc-testnet.nomic.io.
For more information on Babylon’s testnet or obtaining Signet BTC visit Babylon’s Bitcoin Staking Guide.
Dual-Stake Security
Nomic will become one of the first PoS chains to implement Babylon’s Bitcoin staking solution to make Nomic dual-secured by both staked NOM and BTC via Babylon. Users who stake their Bitcoin via Babylon to Nomic will earn both NOM and nBTC staking rewards, redeemable for BTC, a feature unique to Nomic.
Bitcoin stake security will be introduced via a governance proposal following Babylon’s mainnet launch.
Up Next
Stay tuned for further exciting releases including governance tools as Nomic continues its mission to bring DeFi to Bitcoin.
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