BABY, Babylon Genesis, and BSNs - Babylon’s 3 Phases Explained

Bitcoin’s utility is on the cusp of a major upgrade, and will soon become a security asset. Babylon’s Phase 2 activates the economic security model for Bitcoin, and introduces the Babylon Genesis chain and the BABY token.

As Babylon moves into its next phase, it’s important to stay up to date with its developments, and importantly how it impacts you as an LBTC holder, and the Lombard bitcoin staking protocol. This article will:

• Provide a quick overview of Babylon's multi-phased approach,
• Reflect on Babylon's Phase 1 and Lombard's dominant role,
• Detail Babylon's Phase 2, where we'll see the launch of the Babylon Genesis chain and the BABY token,
• Introduce Lombard’s Staking Yield Pool - a unique solution where LBTC holders will claim BABY, and rewards from Bitcoin Secured Networks (BSNs) overtime,
• Look ahead to Babylon's Phase 3 and the future of Bitcoin as a security asset.

Babylon's Multi-phased Approach

Babylon’s evolution unfolds in three key phases. ‘Phase 1: Bitcoin Locking Phase’ introduced the Bitcoin Staking Protocol, enabling BTC holders to stake while maintaining self-custody and giving rise to Bitcoin LSTs like LBTC.

Fast approaching is ‘Phase 2: Babylon Genesis’, which includes the launch of Babylon’s Layer-1 blockchain, introducing uncapped, permissionless BTC staking and debuting BABY, the network’s staking reward and governance token.

Coming later in 2025 is ‘Phase 3: Multi-staking’, which establishes Babylon as a marketplace for shared security, allowing BTC to secure multiple networks simultaneously, starting with BSNs like Corn and BOB.

A Look Back: Phase 1 and Lombard's Dominant Role

As the Bitcoin staking ecosystem continues to evolve, it is important to reflect on the foundational progress made during its initial phase — and the key role Lombard has played in shaping it.

Phase 1: Bitcoin Locking Phase

• Babylon launched the Bitcoin Staking Protocol, allowing BTC holders to stake their assets while maintaining self-custody.
• Over 250 Finality Providers (FPs) including Lombard onboarded. FPs receive bitcoin from other users who want to participate in staking but may not have the technical expertise or resources to run their own validator node.
• Over 57,290 BTC or over 0.2% of all Bitcoin in existence, was staked in three capped deposit rounds, attracting 135,290 unique BTC stakers.
• Bitcoin Liquid Staking Tokens (LSTs) like LBTC emerged, allowing BTC holders to stake their Bitcoin and simultaneously use in DeFi for further utility.

Before Babylon's Bitcoin Staking Protocol launched, there were a handful of Bitcoin derivatives, but no true Bitcoin LST's. Now, this sector now accounts for over 20% of all Bitcoin onchain or around $4 billion worth of Bitcoin.

Lombard’s Role as a Finality Provider

Lombard emerged as the largest Finality Provider, accounting for over 40% of Babylon’s total staked BTC. As Babylon’s leading FP and the leading liquid staking protocol, Lombard has established itself as the dominant player in this ecosystem.

Lombard’s Key Metrics:

• 22,508 BTC in delegations, making up 42% of all Babylon stakes.
• 15,038 BTC staked from LBTC, and 7,470 directly staked to it’s FP

Source: https://messari.io/report/state-of-babylon-q4-2024, https://btcstaking.babylonlabs.io

Exploring Phase 2: The Launch of Babylon Genesis

With Phase 2, Babylon introduces the Babylon Genesis chain, a PoS Layer-1 blockchain secured by BTC. This transition activates Babylon’s economic security model, where Bitcoin holders may stake their BTC and receive BABY rewards.

As the largest Finality Provider, Lombard is central to the success of Phase 2 and its primary responsibility will be delegating BTC to secure the Babylon Chain, ensuring that the network maintains robust security and finality. Beyond securing the chain, Lombard will also be responsible for participating in the consensus process and distributing BABY rewards to stakers.

Key Features of Babylon Phase 2

• Babylon Genesis: The first BSN, is a Layer 1 blockchain and the first network to receive crypto-economic security from Bitcoin. It acts as the control plane enabling other BSNs to connect with the Bitcoin network.
• Finality Providers : FPs like Lombard coordinate to secure Babylon Genesis using staked BTC, and begin block production on Babylon Genesis.
• BABY Token Launch: BABY serves as a staking reward and governance asset.

Staking Yield Pool: Lombard’s unique approach to claiming BABY and BSN rewards

Users that staked BTC for LBTC, are eligible to claim staking rewards, including the BABY airdrop.

To distribute staking rewards, like BABY, Lombard will soon introduce the Staking Yield Pool, where LBTC holders will claim rewards from multiple Bitcoin Secured Networks overtime.

At the time of Babylon’s TGE, Lombard will claim all rewards for LBTC holders, and showcase opportunities to stake and trade BABY from the same interface. To complete their claim, users will need a Babylon Genesis compatible address. Refer to Babylon’s documentation for comprehensive guidance on setting up a wallet.

Users that staked directly to Lombard’s Finality Provider should claim earned BABY from Babylon’s claims portal directly.

Stay tuned for a detailed guide on the Staking Yield Pool and the BABY claims process, where we’ll walk through everything you need to know.

Useful links:

• Create a BABY compatible wallet address: https://babylon.foundation/docs/wallet-compatibilities
• More details: https://babylon.foundation/blogs/airdrop-registration-announcement

Looking ahead to Phase 3: Expanding to Bitcoin-Secured Networks

Following Phase 2, Babylon will extend Bitcoin staking to secure a growing set of BSNs — networks that inherit Bitcoin’s economic security via the Babylon protocol, without relying on bridges or intermediaries. Lombard, as a Finality Provider, will play a key role in this expansion by allocating BTC to BSNs.

Finality Providers like Lombard, selected based on delegation size and performance, will allocate staked BTC to these BSNs, starting with Corn, BOB, and Pell Network. By integrating Babylon’s security, BSNs can complement native token staking with BTC-based security, boosting decentralization and freeing native assets for broader ecosystem use.

To safeguard this model, Babylon enforces slashing via native Bitcoin mechanisms. Misbehaving FPs risk losing funds through UTXO contracts and Extractable One-Time Signatures (EOTS) — a permissionless mechanism where anyone can trigger slashing by proving misbehavior.

As more BSNs onboard, Bitcoin holders gain new ways to earn staking rewards, while powering a new generation of secure PoS networks across Cosmos SDK and rollup ecosystems like OP Stack and Arbitrum Orbit.

Here’s a quick introduction to BSNs:

• Corn

Corn is focused on bitcoin-based DeFi and utilizes BTCN, a tokenized version of bitcoin, as the network’s gas and rewards token.

• BOB

BOB is an Ethereum Layer-2 network focused on bitcoin-based DeFi. BOB’s architecture also leverages BitVM to enable trust-minimized bridges that inherit security from Bitcoin and facilitate interoperability with other Layer-1 networks.

• Pell Network

Pell is an omnichain restaking protocol. Pell Network allows liquid staked bitcoin to be restaked to secure Decentralized Validated Services (DVS).

• LayerEdge

LayerEdge is a proof aggregation layer for Bitcoin, aiming to leverage Bitcoin to secure and verify complex computations without executing them directly.

• BirdLayer (formerly DODOchain)

Birdlayer is a trading-focused Arbitrum Layer-3 network.

• Manta Network

Manta is a general-purpose Ethereum Layer-2 network with $65 million in TVL (USD) at the end of 2024.

LBTC’s Role in Babylon’s Ecosystem

Babylon’s phased roadmap marks a transformative shift in Bitcoin’s utility:

• Phase 1 unlocked self-custodial Bitcoin staking and introduced Bitcoin LSTs like LBTC.
• Phase 2 launches Babylon Genesis, enabling permissionless BTC staking, BABY rewards, and BTC-backed security for decentralized networks.
• Phase 3 will establish a marketplace for shared security, where BTC can secure multiple BSNs simultaneously—creating a new layer of economic coordination across PoS ecosystems.

Throughout every phase, Lombard has been at the forefront—first as the largest Finality Provider in Phase 1, and now as the primary liquid staking solution powering BTC participation in Phase 2 and beyond.

Looking ahead, Lombard aims to unlock even greater utility for Bitcoin by working closely with Babylon and emerging BSNs to expand staking opportunities, integrate BTC-based security models, and drive deeper adoption across the modular blockchain stack.

For BTC holders, Lombard remains the most efficient gateway to participate in Babylon’s staking ecosystem. Start here: https://www.lombard.finance/app/stake/