By
Godfrey Benjamin
April 29th, 2024
The recent announcement by Nomic has also sparked bullish sentiment regarding its native token.
Nomic DAO Foundation has unveiled stBTC, a Bitcoin liquid staking token (LST) powered by Babylon’s Bitcoin staking protocol. This token enables users to leverage their BTC holdings to provide proof-of-stake security to other chains and earn rewards in alternative cryptocurrencies.
How Does the Staking Protocol Function?
Babylon’s Bitcoin staking protocol enables users to stake their BTC directly on the Bitcoin blockchain. To carry this out, users must create a Babylon staking transaction, which incorporates an output that can be spent through a slashing transaction if the validator requires penalization. Alternatively, if no slashing occurs, the user can reclaim their BTC after a specific period.
The integration between Nomic and Babylon is seamless. When users lock their nBTC into Nomic’s BTC staking pool to mint stBTC, the network automatically transfers funds from the BTC reserve to a Babylon staking UTXO. This ensures that users’ BTC contributes to the security of consumer chains and delegates to validators chosen by governance.
The new project offers unique benefits to its holders. They have the opportunity to mint stBTC by locking their nBTC in the staking pool. Holders can earn rewards in various ecosystem tokens, paid by networks that choose to utilize staked Bitcoin security.
The new project further allows users the opportunity to transfer or sell their stBTC at any time since it is a fully liquid token. Additionally, users can opt to burn the new token to unbond and receive an equivalent amount of nBTC, though the unbonding process may take up to 7 days, or potentially faster in some cases.
Testnet and Dual-Stake Security
Currently, the project is active in a special testnet where users can experience its functionality and benefits before its official mainnet release. The test environment utilizes Babylon’s latest Bitcoin staking testnet, which employs Signet BTC. Users can deposit Signet BTC into Nomic to obtain testnet nBTC and then stake it for stBTC at stbtc-testnet.nomic.io.
Looking ahead, Nomic aims to become one of the first proof-of-stake chains to implement Babylon’s Bitcoin staking solution, making 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 unique feature exclusive to Nomic. In the press release, they stated:
“Bitcoin stake security will be introduced via a governance proposal following Babylon’s mainnet launch.”
The Collaboration Is Bullish for NOM
The recent announcement by Nomic has sparked bullish sentiment regarding its native token. Jonabel Belz, an X user with over 10,000 followers who has been closely following the progress of the foundation, commended the project and expressed an optimistic view of NOM. “So bullish for these 2 Cosmos projects collaborating. Compound your $NOM,” said she.