Kraken launches Bitcoin 'staking' feature by integrating with DeFi protocol Babylon.
According to (The Block), cryptocurrency exchange Kraken has launched Bitcoin 'staking' functionality through its new integration with DeFi protocol Babylon.
Users can hold Bitcoin on the Kraken platform and earn up to 1% annual percentage rate (APR) without bridging, wrapping, or lending.
Kraken users can directly 'stake' their Bitcoin on the platform, which is then delegated to Proof-of-Stake (PoS) networks via Babylon for security, with rewards distributed weekly in Babylon's native token BABY.
According to a statement released by Kraken on Thursday, users retain full ownership of their BTC, which remains on the Bitcoin main chain at all times, while rewards are managed through verifiable smart contracts and secured by encryption. Users can stake BTC instantly, but un-staking requires a 7-day unbinding period during which no rewards will be generated.
This feature is only available in the following regions: the United States (excluding California, Maine, Maryland, New Jersey, New York, Washington, and Wisconsin), the UK, Australia, and the UAE.
Mark Greenberg, Head of Global Consumer Business at Kraken, said:
"There is currently a large amount of Bitcoin lying idle on our platform, which represents a significant opportunity cost for clients and a missed opportunity for the entire ecosystem. With this launch, clients can not only earn from their BTC but also help emerging PoS blockchains benefit from Bitcoin's economic weight to validate transactions and enhance network security."
Kraken is the first major crypto exchange to offer native BTC staking yields through Babylon's time-lock protocol, without the need for wrapping, bridging, or lending. In contrast, some platforms (like Crypto.com) offer 'earn' services through lending, which carries additional counterparty risk.
Kraken co-CEO Arjun Sethi posted on X:
"For a long time, it was believed that Bitcoin could not be staked, not because it was a bad idea, but because the necessary infrastructure did not exist. Bitcoin does not support staking; it has no native delegation, no smart contracts, and no penalty mechanisms. Therefore, in the past, all you could do was hold it, hoping it appreciates, or trust a third party to lend it out, without seeing the process."
He added:
"The problem is that Bitcoin is the most secure currency network on Earth, but it is also one of the least productive networks. Currently, over $1 trillion in Bitcoin is lying idle and useless. Only recently has there finally been a trustworthy way to put this Bitcoin to actual use. With the emergence of new protocols like Babylon, we finally have a path to earn native yields without relinquishing control. We are very pleased to support this progress."
Kraken was one of the first exchanges to launch custodial staking services in 2019, supporting staking for blockchain networks like Ethereum, Solana, and Polygon.
How does it work?
Although Babylon is marketed as a 'native Bitcoin staking protocol,' it differs from native staking methods in PoS systems.
Babylon operates as follows:
Users lock BTC in a non-custodial manner through the time lock of the Bitcoin main chain;
BTC remains on the Bitcoin network at all times and will not be withdrawn;
Time locks are achieved through native Taproot scripts (Tapscript), enabling secure delegation;
PoS chains cite these time-locked BTC commitments and view them as an economic security layer;
Users receive rewards from these PoS chains, typically in local tokens (like BABY), rather than BTC;
Supported integrated chains include: Ethereum, Solana, Chainlink, Avalanche, Sui;
Babylon's own Genesis PoS chain acts as a finality layer.
It should be emphasized that:
This is not staking implemented in the native Bitcoin protocol, as Bitcoin is based on proof of work (PoW);
It does not have an inflation mechanism to generate rewards;
Rewards are not in BTC, but in tokens of the PoS chain (like BABY);
More precisely, this is a way of providing security for PoS chains using Bitcoin as collateral.
Although Babylon avoids wrapping BTC and Kraken provides a more user-friendly interface, the scheme still carries the following risks:
Assets cannot be accessed during the lock-up period;
Complexity and risks brought by off-chain coordination;
Reward token price volatility is high;
Kraken's centralized custody remains a risk point.
Introduction to Babylon
Launching the first self-custody BTC staking protocol in August 2024 (Phase One);
The Genesis mainnet will officially launch in April 2025 (Phase Two);
In the same month, crypto insurance provider Nexus Mutual announced it would launch insurance products designed specifically for Babylon users (individual or institutional);
Recently, Babylon airdropped 600 million BABY tokens to early supporters (6% of total supply);
BABY is the native token of the Babylon Genesis chain, used for transaction fees, governance voting, staking, and network security;
Current price is $0.05, with a circulating market cap of approximately $113 million and a fully diluted valuation of $493 million;
Babylon has completed three rounds of funding:
Disclosed completion of seed round funding of $8 million in March 2023;
Completed Series A funding of $18 million by the end of 2023 (co-led by Polychain Capital and Hack VC);
Completed $70 million in funding before the 2024 testnet launch, led by Paradigm.
Kraken is rapidly expanding its product line.
Kraken has recently launched several new services:
Incubating Ethereum Layer 2 network Ink;
Expanding compliant crypto derivatives services in Europe;
Entering the U.S. zero-commission stock trading market;
Preparing to launch tokenized stock trading (covering Apple, Nvidia, etc., outside the U.S.);
Acquired NinjaTrader for $1.5 billion in March this year, becoming one of the largest transactions in crypto and traditional finance history, accelerating multi-asset布局;
Launched an exclusive Prime Brokerage service platform for institutions earlier this month;
This Tuesday, Ink announced the launch and airdrop of its native token INK.
