Kraken, the cryptocurrency exchange, has introduced a new Bitcoin staking option by teaming up with Babylon Labs.
In an announcement on Thursday, Kraken revealed their partnership with the Bitcoin staking protocol, Babylon. This collaboration enables users to earn interest on their Bitcoin holdings without the complexities of bridging, wrapping, or lending.
From today, Kraken users can stake their Bitcoin without needing to engage with unreliable exchange wallets. The Bitcoin will be secured in a vault on the blockchain and delegated to a proof of stake (POS) network regulated by Babylon.
Notably, the rewards won’t be in Bitcoin itself. Instead, users will receive Babylonian Baby Tokens. According to Coinmarketcap, the value of these tokens has surged nearly 5% since the announcement.
Related: Babylon’s total locked wallets decrease by 32% to $1.2 billion in Bitcoin
Bitcoin Staking’s Utility Seeker
Mark Greenberg, global consumer director at Kraken, mentioned that a considerable amount of Bitcoin is just sitting idle on exchanges. He pointed out that these idle assets are “large opportunity costs for clients and missed opportunities for the wider ecosystem.”
With the Babylon integration, Greenberg emphasized how clients can capitalize on their Bitcoin. He also noted the additional advantage for emerging POS blockchains that could leverage Bitcoin’s economic strength to validate transactions and improve network security.
Related: Babylon users gain $201 million in Bitcoin after a token airdrop
BTCFI Observes a Renaissance
BTCFI refers to a financial initiative built on Bitcoin. One of the earliest examples was the Omni Layer, which started on July 31, 2013, and was the only way to transfer the USDT stablecoin before the creation of Ethereum.
However, BTCFI primarily points to newer initiatives like Babylon, which allows Bitcoin holders to stake natively without any need for packaging or bridging—protecting the POS blockchain while managing assets.
Staking takes place through time-locked scripts with no intermediaries involved. Rewards come from 8% annual inflation, divided equally between BTC stakers and Baby stakers. The Baby Tokens can be used for transaction fees and allow holders to participate in protocol changes.
Other BTCFI examples include Layer-2 blockchains built on a Bitcoin foundation, the Ethereum Virtual Machine compatible Bitcoin sidechain Rootstock, the Liquid Network, and scalability solutions like the Lightning Network and Taproot assets.
A report from early May noted a significant rise in network security and mining participation among smart contract platforms, particularly in the first quarter of 2025.
Brendon Sedo, a key figure in Core DAO, suggested in March that Bitcoin is evolving beyond just the “digital gold” concept due to the rise of BTCFI.
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