Crypto exchange Kraken has launched a new Bitcoin staking product through a protocol integration with Babylon Labs.
In a Thursday announcement, Kraken said it has partnered with the Bitcoin (BTC) staking protocol Babylon. The integration allows the exchange’s users to earn interest on their Bitcoin holdings without the need for bridging, wrapping or lending.
Kraken customers can use the service starting today by staking their Bitcoin without interacting with off-exchange wallets. The Bitcoin is locked in a vault on the Bitcoin blockchain and delegated to secure proof-of-stake (PoS) networks through the Babylon protocol.
The rewards are not paid in Bitcoin; users earn Babylon’s BABY token. The BABY price has increased by nearly 5% since the announcement, according to CoinMarketCap.
Related: Babylon total value locked drops 32% as wallets unstake $1.2B in Bitcoin
Bitcoin staking in the search for utility
Mark Greenberg, global head of consumer at Kraken, said that “a substantial amount of Bitcoin currently sits idle on our exchange.” According to him, this idle asset represents “a significant opportunity cost for clients and a missed opportunity for the broader ecosystem.”
Through the Babylon integration, Greenberg said clients can now earn a return on their Bitcoin. He also highlighted how this has the added benefit of “enabling emerging PoS blockchains to benefit from the economic weight of Bitcoin to validate transactions and bolster the security of their networks.”
Related: Babylon users unstake $21M in Bitcoin following token airdrop
BTCFi sees a renaissance
BTCFi describes financial projects built on top of Bitcoin. One of the first such developments was arguably the Omni Layer, launched on July 31, 2013, and once the only way to move Tether’s USDt (USDT) stablecoin, before Ethereum was created.
Still, BTCFi mostly refers to recent projects, such as Babylon. Babylon is a Bitcoin-secured network that enables Bitcoin holders to stake BTC natively, without wrapping or bridging, to secure PoS blockchains while maintaining control over their assets.
Staking occurs via time-locked scripts and without the need for intermediaries. Rewards are derived from an 8% annual inflation, with 4% allocated to BTC stakers and 4% to BABY stakers. BABY can be spent on transaction fees and enables holders to vote on protocol changes.
Other examples of BTCFi include layer-2 blockchains built on Bitcoin Stacks, Ethereum virtual machine-compatible Bitcoin sidechains Rootstock and the Liquid Network, as well as the scalability solution Lightning Network paired with a tokenization layer, Taproot Assets.
Early May reports indicate that smart contract platform Rootstock saw a sharp increase in network security and mining engagement in the first quarter of 2025. Research released in April by leading crypto exchange Binance showed that the value locked in Bitcoin-based decentralized finance has surged by more than 2,700% over the past year.
Brendon Sedo, Core DAO initial contributor, argued in March that Bitcoin is outgrowing the “digital gold” narrative thanks to the rise of BTCFi.
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