BTC staking mechanism
When a wBTC token is deposited into Bedrock, an actual BTC token will be staked to the Babylon network in real-time. This process can occur through one of two approaches currently in development:
Proxy Staking: a proxy mechanism can be used, where wBTC tokens are staked on the Ethereum network, and a corresponding amount of BTC tokens are staked on the Babylon network by a trusted party. This approach allows for flexibility and interoperability between the two networks.
Direct Conversion: Alternatively, wBTC tokens are instantly redeemed into BTC tokens, which are then staked directly onto the Babylon network. This approach ensures seamless and immediate conversion and staking, without involving the centralised custodial wallet.
Both approaches aim to facilitate the smooth transition of assets between the Ethereum and Babylon networks, enabling efficient and secure staking operations.