Analysts at Nansen Identify Babylon Chain as a Potential Hidden Gem in Bitcoin’s DeFi Ecosystem

According to a recent report by blockchain analytics firm Nansen, Babylon Chain is emerging as one of the most undervalued projects in Bitcoin’s decentralized finance (DeFi) landscape. The platform’s innovative approach to leveraging Bitcoin’s security for DeFi applications positions it as a compelling investment opportunity that may currently be overlooked by the market. Nansen’s research highlights Babylon’s unique value proposition in bridging Bitcoin’s robust security with the growing DeFi sector, suggesting it could play a pivotal role in Bitcoin’s expanding utility beyond just a store of value. This analysis comes as institutional interest in Bitcoin-based financial products continues to grow, potentially creating new opportunities for undervalued protocols like Babylon Chain to gain traction.

Where Bitcoin restaking rewards come from

Since Bitcoin itself does not offer staking rewards, these incentives come from the Babylon chain, primarily via BABY token inflation. Its annual inflation rate of 8% is split evenly between Bitcoin and BABY stakers.

This means BABY token stakers are betting that the token’s growth will exceed the 8% inflation rate. For Bitcoin holders, however, the protocol creates a new revenue stream without giving up custody of their assets—protecting them from third-party risks such as hacking or rug pulls.

Over the past year, Bitcoin’s DeFi ecosystem has seen substantial growth. Its ecosystem reached an all-time high of nearly $8 billion in December of last year. Even after a subsequent correction to $5.27 billion, it still experienced more than 500% growth year over year.

Developers and entrepreneurs are increasingly betting on Bitcoin DeFi due to its strong name recognition and vast user base. At the same time, they see decentralized finance as a way to unlock new use cases for the Bitcoin network.