# Self-custodial BTC Staking (Babylon)
## Refresher on Babylon Genesis and Co-Staking
#### **Babylon Genesis Overview**
[Babylon](https://babylonlabs.io/) is a Bitcoin-secured proof-of-stake (PoS) chain designed to extend Bitcoin’s security to other ecosystems without requiring wrapped assets or custodial bridges. It introduces a novel “Bitcoin Timestamping” and “Finality Provider” model, enabling Bitcoin to serve as the ultimate source of trust for other blockchains.
#### **Self-Custodial Bitcoin Staking**
Babylon Self-Custodial Bitcoin Staking lets Bitcoin holders stake their BTC **directly on the Bitcoin network,** no wrapping, no bridging, and no third-party custody.
When you stake, your BTC stays in your own wallet and is **time-locked** using Bitcoin’s built-in script.\
You delegate your staked BTC to a Finality Provider, who helps secure Proof-of-Stake (PoS) chains. In return, you earn rewards.
**Key characteristics:**
* **CSV (CheckSequenceVerify) Script:** Your BTC is locked with a **time delay** on the Bitcoin network. You can only spend it again once the lock period ends.
* **Slashing (capped):** Protocol slashing **can apply** for defined misbehavior conditions (e.g., security/consensus faults), but is **capped at 0.1%** of the staked BTC.
* **Self-Custody:** You always keep control of your BTC. Babylon only verifies the proof of your lock on Bitcoin to confirm eligibility for securing networks and earning rewards.
This design keeps Bitcoin’s native security intact while allowing BTC to become a productive, yield-generating asset — all without bridges or custodians.
{% hint style="info" %}
*For foundational concepts, refer to* [*Self-Custodial BTC Staking.*](/architecture/self-custodial-bitcoin-staking.md)
{% endhint %}
#### **Co Staking**
In 2025, Babylon introduced **Co-Staking**, a mechanism designed to align incentives between BTC stakers and BABY token holders.
* Staking BTC alone earns a base yield.
* Adding BABY in proportion to BTC (e.g., 1 BTC : 20,000 BABY) unlocks co-staking boosted rewards, \~5-10x the base yield.
* Co-staking is optional but incentivized, as higher BTC:BABY ratios lead to higher reward.
Example:
\
• Alice stakes 6 BTC + 50K BABY → weight 2.5
\
• Bob stakes 6 BTC + 150K BABY → weight 6
If 10K BABY rewards are distributed →
Alice earns 2.94K, Bob earns 7.06K.
***
## Building Dual Staking **Marketplace on Babylon**
### **The Challenge**
While Co Staking increases yield, it requires users to hold both BTC and BABY — a barrier for many Bitcoin holders. BTC users are often reluctant to purchase BABY due to **price volatility** or **portfolio concentration risks**.
This capital asymmetry means:
* BTC holders miss out on higher-yield opportunities.
* The base yield alone is not enough to attract sufficient BTC participation to secure the Babylon and its BSNs.
* Lower BTC participation leads to weaker overall network security.
### **Solution: b14g Merge Marketplace**
The **b14g Merge Marketplace** solves this coordination problem by connecting BTC and BABY holders on-chain. It allows users to pair their assets without directly buying the other.
#### **b14g Advantage:**
* Preserve native self-custodial BTC staking. BTC remains time-locked in users' wallet on Bitcoin network, secured by CSV time-locks.
* BTC holders can find BABY partners to reach higher yield tiers.
* BABY holders can match with verified BTC locks to earn co-staking rewards.
* All interactions are automated, on-chain verifiable, and non-custodial.
***
## How BTC Staking works on b14g
#### **Key Components:**
| Component | Description |
| --------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- |
| **CSV Time-Lock Script** | Native Bitcoin locking mechanism ensuring self-custody. |
| **Vigilante** | Monitor for valid BTC staking transactions, validate and register confirmed BTC staking position on Babylon chain. |
| **Babylon Staking Modules** | Records BTC staking delegation; Pays rewards as per Babylon reward policy. |
| **Merge Marketplace** | Matching "orderbook" layer that connects BTC and BABY stakers for co-staking. |
| **Order Contract** | Represents your BTC staking position on the marketplace for co-staking matching; Collects and splits yield between you and BABY stakers. |
#### **BTC Staking Flow**
1. **Order Creation:** Alice creates an **order** on the **b14g Merge Marketplace**, defining a reward-sharing ratio for future BABY staking partners and selecting the FP she wants to delegate to.
2. **BTC Lock:** Alice locks 10 BTC on the Bitcoin network using a **CSV time-lock script**.
3. **Proof Verification:** Once the lock transaction is confirmed on the Bitcoin network, **Vigilante** in Babylon's infrastructure detect it and submit the proof to Babylon chain, making the BTC eligible for securing networks and earning rewards.
4. **Order Activation:** Alice’s BTC staking position is now registered on b14g Merge Marketplace as an **active order**, visible and open for BABY stakers to join.
5. **Co-staking Matching:** Bob, looking to earn yield on his BABY tokens, matches with Alice’s order by staking his BABY. His BABY is sent directly to the **Babylon staking module** — b14g never holds user funds.
6. **Reward Distribution:** **Order Contract** automatically collects rewards and routes them to:
1. Alice’s staked BTC generates rewards that go directly to her.
2. Bob’s staked BABY generates rewards that go directly to him.
3. Co-staking boost rewards (from staking BTC + BABY) are shared between Alice and Bob according to the reward-sharing ratio defined in the order.
7. **Unlock:** After the lock period ends, Alice can redeem her BTC. If she chooses to **unbond early** before the time-lock expires, she can do so, but must wait for a **301-block (\~3 days)** unbonding period before her BTC becomes spendable again. The entire process remains fully self-custodial.
{% hint style="info" %}
Key points to remember:
* Your **BTC stays self-custodial**, time-locked in your own wallet on the Bitcoin network.
* Only rewards are on Babylon Genesis; matching and splits are handled by contracts.
* **Slashing exists** on Babylon, with a **maximum penalty of 0.1%** of the staked BTC.
{% endhint %}
***
## Source of Yield
> *If you don’t know the source of yield, you’re the yield.*
### How are yields generated?
Your yield comes from two sources:
* **BTC staking rewards (Base yield)**: Your BTC contributes to [Babylon network security](https://docs.babylonlabs.io/guides/overview/babylon_genesis/#consensus--security-model), earning you yield in return.
* [**Co-staking**](https://forum.babylon.foundation/t/inflation-reduction-and-the-introduction-of-co-staking/718/) **rewards (Boosts)**: Babylon offers additional incentives when BTC and BABY are staked together. Through b14g Merge Marketplace, your BTC can be matched with BABY stakers to earn these extra rewards, boosting your APY without requiring you to hold BABY.
***
## Supported Wallets
| Bitcoin Wallets | Babylon‑Compatible Wallets |
| ------------------- | -------------------------- |
| UniSat | OKX |
| OKX | Keplr |
| Xverse | Leap |
| Keystone (hardware) | +9 others |
You need a **Bitcoin wallet** to stake BTC and a **Babylon (Cosmo) wallet** to claim rewards.
***
## How to Participate
{% content-ref url="/pages/E6XTnuNRd8O7u7jFuqyV" %}
[Guide: BTC Staking (Babylon)](/user-guide/for-btc-holders/guide-btc-staking-babylon.md)
{% endcontent-ref %}
{% content-ref url="/pages/uLSkQRTfKiPcw3TbUeNp" %}
[FAQ: Self-custodial BTC Staking (Babylon)](/faq/faq-self-custodial-btc-staking-babylon.md)
{% endcontent-ref %}
***
## **Summary**
Self-custodial BTC staking on Babylon enables Bitcoin holders to earn real yield while preserving security and ownership. Integrated with **b14g’s Merge Marketplace**, it becomes more inclusive — lowering entry barriers and connecting BTC and BABY holders for sustainable, dual-asset yield.
> b14g transforms Bitcoin into productive capital on Babylon — fully self-custodial, collaborative, and yield-optimized.
## Enjoy your BTC yield!
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