Babylon vs EigenLayer: why they are not direct competitors
Thread673 words
Argues Babylon is a Cosmos PoS chain lending BTC security to other PoS chains, less general than EigenLayer's programmable trust platform. Expects both to coexist with different capital pools; EigenLayer holds about $12B and is unlikely to add foreign assets soon.
Key claims
EigenLayer has roughly $12B in crypto-economic capital
Babylon is not generalizable to the degree of EigenLayer
Sreeram Kannan advises Babylon
Is Babylon really an @eigencloud competitor?
Is @sreeramkannan actually an advisor to @babylonlabs_io?
Does that men $BTC restaking on EigenLayer cooking already?
Let me share some alpha and explain what few understand ⤵️
First of all, I don't think Babylon is a direct competitor to @eigencloud.
But let me explain.
Babylon is not a developer platform or decentralized cloud platform for verifiable services like @eigencloud.
@sreeramkannan even used to contribute to the protocol before solely focusing on @eigencloud, and has remained an advisor to @babylonlabs_io (so yes, this is true).
In 2022, he described Babylon as follows:
- Allows Cosmos chains to borrow crypto-economic security from Bitcoin.
- Reduces unbonding periods using Bitcoin timestamping.
What does that mean?
While the concept of borrowing security from a shared security layer and the remote staking concept are very similar to @eigencloud, Babylon is not generalizable to the degree of @eigencloud.
It is a Cosmos PoS chain secured by $BTC that acts as a coordination layer for other PoS chains that are in need of crypto-economic security capital that @babylonlabs_io finality providers can make available.
@eigencloud on the other hand is a system that is designed to allow builders to bootstrap decentralized networks with on-demand security provided through restaked operators. These operators can run arbitrary software logic, allowing developers to leverage the "programmable trust" to build any verifiable service on top of it.
In this service-centric vision, AVS protocols built on the @eigencloud cloud for security, provide the core building blocks and APIs for builders to piece together apps in a fully abstracted environment, akin to today's Web2 DevEx.
But back to @babylonlabs_io.
It enables $BTC holders to stake for yield that results from validating PoS chains and essentially turns $BTC or rather the liquid staking derivatives of it, into an asset equivalent to existing PoS assets like $ETH and $SOL.
That begs a question.
Why not use these LSTs in restaking models like @eigencloud?
And actually, similar stuff is already happening.
There is an increasing number of EL competitors that support various assets, expanding the narrative beyond Ethereum.
While @satlayer is an example of a protocol that exclusively aims to leverage Babylon LSTs for security, @symbioticfi, @Karak_Network, @Picasso_Network or @nektarnetwork are shared security layers that rely on multi-asset restaking designs.
The former is specifically focused on staked $BTC, the latter are likely to integrate Babylon LSTs for restaking soon too.
So, what about @eigencloud? ♾ ✨
Due to its Ethereum-centric design and the abundance of crypto-economic capital that is already available in the system (roughly $12B), I don't expect @eigencloud to go for foreign asset integrations soon.
What I see as the more relevant challenge, is to make sure that crypto-economic capital is efficiently and dynamically served to AVS protocols based on their need for security.
Will dive into that more soon, but pretty sure @eigencloud is cooking something here to maximize capital efficiency.
However, with Sreeram being an advisor to @babylonlabs_io, a future addition of staked $BTC assets in @eigencloud's restaking design is a possibility (unlikely though imo).
Could rather see @babylonlabs_io build out some functionality like this natively, further extending $BTC security to applications and decentralized systems more broadly.
A world in which the two shared security systems co-exist, both leveraging different pools of crypto-economic capital, is the likely outcome imo.
But enough speculation.
What's a fact: In a 2023 panel, @dntse (co-founder of Babylon) did mention talking to Sreeram (who was also present) a lot about forming an alliance in order to build best practices for this novel, emerging concept of shared security.
They both agreed that it bears a lot of potential to do good, but can also pose significant risks to the underlying, decentralized networks and the economies that evolve on the app layer.
Will keep you informed, drop a follow. Thanks! 🙏
Deep dive on @babylonlabs_io by @RedactedRes
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For alpha on the largest DeFi protocol building on @babylonlabs_io, check out my data-driven deep dive on @SolvProtocol below. ⤵️
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