Overview

Babylon is a blockchain platform built on the Cosmos SDK that implements novel protocols for Bitcoin timestamping and Bitcoin-based staking. It aims to provide Bitcoin-level security assurances to Proof-of-Stake (PoS) blockchains without requiring modifications to the Bitcoin network. Babylon achieves this through two primary mechanisms:

• Bitcoin Timestamping: Babylon periodically submits cryptographic commitments of its state to the Bitcoin blockchain. These commitments, or checkpoints, are encoded in Bitcoin transactions using OP_RETURN outputs. Babylon Chain’s state can include other chains’ headers (more on that later), which effectively timestamps their blocks in Bitcoin when Babylon is checkpointed.
• Bitcoin Staking: Babylon allows Bitcoin holders to stake their BTC using complex Bitcoin scripts that enable delegation, unbonding, and slashing functionalities without moving the BTC off the Bitcoin network. This staked Bitcoin can be used for securing other networks through a finality gadget.

Babylon's architecture comprises several custom modules that interact with core Cosmos SDK modules. It implements a modified consensus mechanism that includes an additional finality round on top of the standard Comet BFT/Tendermint consensus, where Finality Providers vote using their Bitcoin-staked voting power — the Babylon finality gadget.

The Babylon Chain is designed to serve both as a standalone blockchain and a security provider for other PoS chains, which it refers to as Consumer Zones. It utilizes the IBC protocol for interoperability with other Cosmos-based chains.

Core Concepts

Epoching

Babylon implements an epoched structure, where each epoch consists of a fixed number of blocks. This is because, in the Cosmos SDK, the validator set can change with every block, impacting stake distribution through various staking-related actions (e.g., bond/unbond, delegate/undelegate/redelegate, slash).

This frequent and independent updating of Cosmos SDK, however, poses various challenges:

1. Babylon's Bitcoin Timestamping protocol requires checkpointing the validator set to Bitcoin upon every validator set update.
2. Bitcoin's 10-minute block interval makes checkpointing every new block impractical.
3. Frequent validator set updates complicate the implementation of threshold cryptographh, light clients, fair leader election, and staking derivatives (ADR-039).

An epoching design is necessary to reduce the frequency of validator set updates and, consequently, the frequency of checkpoints submitted to Bitcoin.

Adding Epochs

As should be expected, each epoch consists of a fixed number of consecutive blocks. The number of blocks in an epoch is called epoch interval, is configurable.

This is not supported by Cosmos SDK itself, though there are discussions on it. Babylon made its own solution based on those discussions.