a16z: Why We Bought $15 Million Worth of Babylon's BABY Investment

Source: Guy Wuollet and Liz Harkavy, Partners at a16z crypto; Translated by Jinse Finance

When Bitcoin was first proposed in 2008, it was positioned as a "peer-to-peer electronic cash system," a new type of currency. Since then, individuals, institutions, and even nations have primarily viewed Bitcoin as a digital store of value, the "digital gold" of the new era.

This represents an incredible opportunity for global individuals with persistently unstable national currencies, and for institutions and nations seeking a secure way to store value on their balance sheets.

Unfortunately, Bitcoin's enormous potential beyond being "digital cash" remains untapped. Due to its limited programmability, thousands of BTC remain dormant in digital vaults, failing to become active in decentralized finance (DeFi). We believe this can change, and Bitcoin has the potential to become a thriving form of digital collateral for credit. Using BTC as collateral will unlock the largest untapped source of on-chain capital in the DeFi space and make Bitcoin a productive asset for its holders. It is this vision for the future that led us to focus on Babylon. Babylon, initially a Bitcoin staking protocol, is now planning to expand into the lending space through its trustless vaults architecture. These trustless vaults are built using witness encryption and garbled circuits, allowing Bitcoin to be used natively in DeFi without asset wrapping or custody. In the short term, we are excited about the prospect of Babylon expanding into a native Bitcoin lending protocol. We believe it will help provide a trust-neutral form of Bitcoin for lending protocols, rather than a wrapped version reliant on exchanges or multisignature custody. In the long term, we see tremendous potential for Bitcoin as collateral in perpetual contract exchanges and stablecoins. Babylon was founded by David Tse and Fisher Yu. I (Guy) have known David for many years, initially as his student in his EE 374 (Blockchain Extensions) course at Stanford University. He is not only an exceptional scholar but also a tireless cultivator with one of the most extensive faculty and student networks in the crypto space. David's PhD students, Joachim Neu and Nusret Tas, are currently working on our research team. He has co-authored several papers with Sreeram Kannan, the founder of EigenLayer (including Prism), which was how I first met Sreeram. David was also his postdoctoral mentor at Stanford before Dionyzis Zindros founded Common Prefix and helped launch Pods. We have been discussing Babylon with David for several years and have witnessed his transformation from an outstanding scholar to an exceptional founder. David is joined by Fisher Yu and a seasoned team with strong technical and market entry (GTM) capabilities. Fisher combines deep technical expertise with a pragmatic spirit, dedicated to enabling Bitcoin to play a greater role in the world. We are thrilled to support David, Fisher, and the Babylon protocol by investing in a $15 million BABY token purchase and witnessing the next evolution of Bitcoin's utility.