--- title: "Bitcoin Staking Without Bridges: How Slashing Works" canonical: https://wavect.io/podcast/david-tse-bitcoin-staking-without-bridges/ language: en description: "David Tse explains Bitcoin timelocks, remote slashing, EVM compatibility and staking versus lending. Full Babylon interview transcript with timestamps and sources." image: "https://wavect.io/img/yt/0j0eSjSCigg.jpg?v=c65c58cf68fa" --- Podcast Transcript # Bitcoin Staking Without Bridges: How Slashing Works David Tse Stanford professor and Babylon co-founder (at recording) How can Bitcoin secure another blockchain while staying on Bitcoin? In this September 2023 interview, Stanford professor and Babylon co-founder David Tse explains why staking can avoid a bridge, why a timelock alone is not enough, and how cryptography can turn validator misconduct into a Bitcoin spending condition. He discusses slashable fractions, consensus compatibility and the distinction from lending. Launch plans, market figures and security claims reflect the recording period. - Published 22 Sep 2023 - Runtime 30:36 - Operator - Recorded in English ![Bitcoin Staking Without Bridges: How Slashing Works: podcast episode with David Tse, Stanford professor and Babylon co-founder (at recording)](/img/yt/0j0eSjSCigg.jpg?v=c65c58cf68fa) // The short version - At 05:01, Tse describes the security-bootstrap problem of a new proof-of-stake chain with a low-value native token. He proposes adding external Bitcoin collateral. This is an economic-security argument, not a claim that market capitalization alone determines consensus safety. - At 07:36, Tse explains that the staking use case can leave Bitcoin on its own chain. The consumer chain receives security rather than a freely transferable wrapped asset. At the consensus layer, the idea does not depend on EVM compatibility. The [Babylon Bitcoin staking litepaper](https://docs.babylonlabs.io/papers/btc_staking_litepaper.pdf) describes the remote-staking approach. - At 10:00, a confirmed Bitcoin timelock transaction establishes that funds are locked; it does not itself enforce good validator behavior. At 13:48, Tse describes making misconduct unlock a slashing spend. The later [Bitcoin Staking research paper](https://arxiv.org/abs/2408.01896) formalizes remote slashing and secure unbonding assumptions. - At 16:23, Tse illustrates two transaction outputs, one protected from slashing and another slashable. His 90/10 split is an example, not a universal Babylon setting. The tradeoff is between the holder’s loss exposure and the consumer chain’s economic protection. - At 26:56, Tse distinguishes slashing from lending exposure and argues that good behavior makes slashing more controllable. That is his 2023 risk assessment. Delegation, implementation failure, lockups and asset-price changes still matter; bridge-free staking is not risk-free yield. ## Opening highlights and David Tse's research background [Watch this part · 0:00](https://www.youtube.com/watch?v=0j0eSjSCigg&t=0s) Opening montage [Edited opening highlights.] Kevin: Today with David, who's a Stanford professor and co-founder of Babylon. Bitcoin possibly enhancing the security or consensus mechanism of proof-of-stake blockchains. David: In my earlier life I used to do research in wireless infrastructure. Five years ago I read Nakamoto's white paper. Doing research in blockchain consensus protocols, that's our specialty. The more capital, the more secure the blockchain is. Your native token usually has a low market cap. One reason why most Bitcoin is idle is that bridging is considered very high risk. The simple thing you can do on Bitcoin is put it in a so-called timelock deposit. It's called a spending condition. Making this idle asset useful for the rest of the crypto economy. Another important function is triggering the interest of Bitcoin holders. A few months ago there was a new development in the Bitcoin ecosystem called Ordinals. Kevin Wavect, the Web3 software company that understands what you want. Hi everyone, welcome at Wavect, today with David, a Stanford professor and co-founder of Babylon, a blockchain using Bitcoin's proof-of-work consensus mechanism. Today we'll talk about Bitcoin possibly enhancing the security or consensus of proof-of-stake blockchains. David wrote at least two papers about this topic. I'm excited to have you here. Thanks for taking the time. Please introduce yourself, let us know what you're working on and whatever you think is worthwhile sharing. David Thanks, Kevin, for having me on the program. I've primarily been a researcher. I started as a professor at UC Berkeley and moved to Stanford eight years ago. In my earlier life I researched wireless infrastructure, focusing on making the cellphones we have now work. They didn't work twenty years ago, but now they work, so that's great. Twenty years later I decided to do other things. Five years ago I read Nakamoto's Bitcoin white paper and found it fascinating from a research perspective. I started assembling a group at Stanford. We now have seven students and postdoctoral researchers working on blockchain consensus protocols. That's our specialty. We've collaborated with industry groups, including the Ethereum Foundation, on improving Ethereum's proof-of-stake protocol before the Merge. About a year and a half ago we had the idea that there are advantages to combining Bitcoin security with a proof-of-stake blockchain. That's where Babylon came from, a startup we began about a year and a half ago. ## Why use a non-native asset for proof-of-stake security? [Watch this part · 3:28](https://www.youtube.com/watch?v=0j0eSjSCigg&t=208s) Kevin Sounds exciting. I researched your project and understand you plan to launch mainnet next year, early next year? [David: We're aiming around the next halving.] The next Bitcoin halving, exciting, great timing. To summarize for less technical people, please correct me: most new proof-of-stake blockchains struggle to reach the necessary threshold of staked native assets to provide decent consensus security. Your newest paper, released this month I think, focuses on bringing non-native assets like Bitcoin into that mechanism. Personally, how did you come up with this? It's out of the box. What made you think it was feasible and made sense? David For some background, proof of stake is secured by capital. The more capital, the more secure the blockchain. Traditionally a proof-of-stake protocol launches a native token and uses it to secure the blockchain. There are issues, especially for a new blockchain. Your native token usually has a low market cap. Low market cap means low security. To improve security, you typically offer high currency inflation to attract investors, increase market cap and increase the value staked. That causes problems for new chains. They want to develop applications, not spend all this inflation on security, which is a means, not the ends of a blockchain. Our idea is that, in addition to the native token, you can bring in a much larger, in some sense more stable asset like Bitcoin to validate and secure your chain. It's a double win: the proof-of-stake chain has more stable capital to rely on, potentially cheaper because the supply is so large. Bitcoin holders currently earn almost zero yield, just holding it. This gives them an opportunity to earn upside by investing in a proof-of-stake chain and earning its rewards. We think it's a double win. ## How can Bitcoin staking avoid a bridge? [Watch this part · 6:56](https://www.youtube.com/watch?v=0j0eSjSCigg&t=416s) Kevin Honestly, my first thought when skimming your paper was: how does this work without facing the security issues bridges or cross-chain protocols face? Especially since Bitcoin isn't EVM-compatible and many proof-of-stake networks are EVM chains. I'd love to know your approach, at a high level or in depth. David Let me split your question into several aspects. You're correct: one reason most Bitcoin is idle is that holders consider bridging a very high-risk operation and don't want to bridge from Bitcoin. Most DeFi activity happens elsewhere, so there are few ways to earn yield. Our design found that for this particular staking use case, you don't need to bridge Bitcoin. Bridging lets you do anything on the other chain but exposes you to bridge risk. If you focus on the specific but important use case of providing security to a proof-of-stake chain, our technology says bridging isn't needed. On EVM compatibility, our security happens at the consensus level, one level below the EVM. It doesn't matter whether the chain is EVM or non-EVM; the technology still works. ## What does a Bitcoin timelock prove? [Watch this part · 9:13](https://www.youtube.com/watch?v=0j0eSjSCigg&t=553s) Kevin How does it work? I imagine a Bitcoin smart contract, perhaps not so simple, where you stake Bitcoin. The proof-of-stake chain gets some validity proof confirming it was staked, then you get rewards on that chain. That's just my assumption. Could you correct it to your solution? David At a high level that's quite correct, but let me elaborate. First, there's no smart contract on Bitcoin, meaning you can't write an arbitrarily complex contract. However, there are simple things you can do. Our technology uses what's simple on Bitcoin to achieve our purpose. That's the challenge. You can put Bitcoin into a timelock deposit. Bitcoin Script has the ability to lock it for, say, six months. That means you've entered a transaction on Bitcoin saying this one Bitcoin is locked for six months. Everybody, including the proof-of-stake chain, can see that confirmed transaction. That's the proof you mentioned. It doesn't need fancy technology like a ZK proof, just a confirmed transaction everyone can see. The other chain knows this person has locked one Bitcoin to secure it. The key challenge is that staking has an important aspect called slashing. It's like putting down an Airbnb deposit to guarantee you won't trash it. If you behave and leave properly, you get the deposit back. That deposit ensures good behavior. Similarly, if you stake one Bitcoin on a proof-of-stake chain, it must be sure you won't trash the chain. It needs the ability to slash, or take away, that Bitcoin or a fraction upon bad behavior, so bad behavior doesn't happen. That's the challenge of the whole problem: how to do slashing. ## Does remote slashing require IBC or a smart-contract VM? [Watch this part · 12:54](https://www.youtube.com/watch?v=0j0eSjSCigg&t=774s) Kevin Does communication between those networks happen through Cosmos' Inter-Blockchain Communication protocol? David No. Cosmos is an ecosystem we've collaborated with a lot, but the technology works generally. All the communication needs is to send transactions to Bitcoin. We don't need a complicated communication protocol. Kevin The funds are slashed on Bitcoin and everything happens there, but how does Bitcoin determine wrongdoing? David Exactly. Bitcoin isn't very smart. It can't inspect a proof-of-stake chain to figure out what's happening there. Instead, our design goes the other way: if something bad happens on the other chain, we want anybody to be able to send a Bitcoin transaction to slash the funds. Your audience may know fraud proofs, for example the rollup technology Arbitrum. Bad behavior on a rollup is sent to the main chain, Ethereum, to slash funds or revert transactions. Our design is somewhat similar: a proof-of-stake relayer sees bad behavior and sends something like a fraud proof back to Bitcoin. But there's a huge difference between Bitcoin and Ethereum. [The captions say Bitcoin here; the comparison appears to refer to Ethereum] has smart contracts to process and understand the fraud proof. Bitcoin has no such smart contract. It doesn't understand anything except spending Bitcoin, called a spending condition. We have to design our fraud-proof system cryptographically so that Bitcoin only needs to take the message and recognize it as a spending message, and slash based on that message. ## Can only part of a Bitcoin stake be slashable? [Watch this part · 15:54](https://www.youtube.com/watch?v=0j0eSjSCigg&t=954s) Kevin That answers my next question. I read that you're revealing the private key and wondered how it worked. If ten Bitcoin are staked, you hopefully don't want to slash all ten for one misbehavior. That explains that part. David Slashing ten Bitcoin would be the extreme design. It would give very strong security to the proof-of-stake chain, but potentially be scary for the Bitcoin holder. You're trading off the staker's peace of mind and chain security. The solution is simple: design the Bitcoin contract so that, for example, ninety percent is timelocked and only ten percent can be slashed. A Bitcoin transaction can have two outputs. One contains ninety percent, locked and withdrawable but not slashable. The other ten percent is also timelocked but can be slashed. That's entirely possible. Kevin Can the proof-of-stake chains or their communities choose parameters like this ratio? David Correct. That contract is signed between the staker and the chain they want to validate. Different chains can have different parameters: ten percent, five percent or fifty percent slashing. On current chains, Ethereum for example is fairly high, around fifty percent, while Cosmos chains are lower, about five percent. Different chains have different parameters. ## Combining consensus research, cryptography and Bitcoin Script [Watch this part · 18:20](https://www.youtube.com/watch?v=0j0eSjSCigg&t=1100s) Kevin Research is challenging, especially in cryptography. What was the hardest part of coming up with this? Were you stuck anywhere, or was there a point where you thought it was really difficult? David The biggest challenge is that there are many types of fraud and Bitcoin can't interpret them. Converting many types of fraud into something simple Bitcoin can interpret, spending a transaction through private-key release, is the biggest challenge. We bring two kinds of expertise. First, consensus protocol design: we understand bad actions participants or validators can take. We redesign consensus so those bad actions can be converted into this simple event. Second, we layer on a special cryptographic scheme that forces release of the private key upon that bad event. It's interesting to combine those. Some blockchain researchers know a lot about cryptography, others about consensus protocols, but the sets don't overlap much. We collaborate with partners to combine them, and need a deep understanding of Bitcoin Script too. As an analogy, not to elevate ourselves, the research has a similar flavor to Nakamoto's white paper. Designing Bitcoin needed expertise from many fields: proof of work, public-key cryptography, game-theoretic incentives and control theory for tuning proof-of-work difficulty. Combining those solved a hard problem. Our work has that flavor, and that's exciting. ## Why Bitcoin rather than another chain's asset? [Watch this part · 21:38](https://www.youtube.com/watch?v=0j0eSjSCigg&t=1298s) Kevin You started with Bitcoin liquidity. I understand it from a consensus perspective, though [brief remark unclear], and the mindset makes sense. What's your view on non-native assets from other proof-of-stake chains? A new chain could use Ethereum or Solana liquidity, though Solana is harder. They offer more complex toolkits to achieve the mission. Do you plan that, or want to stay with Bitcoin as the liquidity source? David I understand. The idea of using a foreign asset to secure a proof-of-stake chain is general. It doesn't have to be Bitcoin; it could even be another proof-of-stake chain. I agree. We focus on Bitcoin for several reasons. It's by far the largest crypto asset, six hundred billion, about two or three times Ethereum and many times Solana. It's a huge source of capital. Interestingly, it is also the most idle asset, mainly a store of value rather than something that facilitates the crypto economy. Our technology is a step toward making it useful to that economy. Our staking protocol is trustless, so it has the highest possible security and could be a good first step for Bitcoin holders to venture beyond Bitcoin because it's very secure. Once you earn other yield, a second step might be doing other things that are less secure, but you're more willing to try them. We provide security and also stimulate holders' interest in participating more broadly. An analogy is Ordinals, a new development a few months ago, basically NFTs for Bitcoin. It's a particular use case renewing broader interest beyond Bitcoin as a store of value. We see our security-focused project in a similar way. ## How does staking risk differ from lending risk? [Watch this part · 26:20](https://www.youtube.com/watch?v=0j0eSjSCigg&t=1580s) Kevin Thinking about that research, [brief phrase unclear], we see similar issues with protocols at the application layer too, not just consensus. Could lending protocols, compared in your blog article, be another use case? Or is it only applicable at consensus level? David One reason we're focusing on consensus is that staking differs interestingly from lending. The risk you take is slashing risk, which is fully self-controllable: like an Airbnb, if you behave nicely you don't expect the deposit to be removed. It's under your control. With lending you're exposed to market conditions. I think slashing, among crypto investments or DeFi activities, is the most controllable risk. We felt starting with that would be good for Bitcoin holders. ## Web3 research surprises and the next guest's question [Watch this part · 27:53](https://www.youtube.com/watch?v=0j0eSjSCigg&t=1673s) Kevin That makes sense, I was curious. We introduced a tradition last episode: the previous guest asks the next guest a question without knowing who they'll be. What is the most interesting thing you discovered in Web3 that really surprised you? David I've worked in Web3 for five years. Since the person asking doesn't know whom they're asking, I'll answer from a researcher's perspective. I find the collection of smart researchers fascinating. They come from all directions, are brilliant, and I enjoy working with them. They're not only academics but also industry founders. I collaborate with Cosmos founders, and they're amazingly strong researchers and entrepreneurs. That's impressed me after a few years in crypto. Kevin Do you have a question for the next guest? David What do you think is the iPhone moment for Web3? When is it coming and what form will it take? Kevin Brilliant question. Thanks, David, for talking with me. Is there anything else to share? I'll put your links in the video description. I hope you and the audience enjoyed the episode as much as I did. Thank you for watching. David It's great to be here. Thanks for a very enjoyable conversation. Kevin Wavect, the Web3 software company that understands what you want. Prepared from English automatic captions with speaker labels, punctuation and clear recognition errors corrected. Includes the edited opening montage and complete conversation. Unclear remarks and an apparent Bitcoin/Ethereum caption mismatch are marked in brackets. Translations cover the same material. No independent audio transcription or listening pass was performed; the recording remains authoritative. Launch plans, market figures, illustrative slashing percentages and opinions about risk reflect September 2023, not current protocol parameters or investment guidance. Bitcoin Script supports spending conditions; references to no smart contracts concern arbitrary Ethereum-style execution. Avoiding a bridge does not eliminate validator, implementation, lockup or market risk. // Keep digging [Plan a blockchain application→](/services/blockchain/) [João Garcia on execution and verification tradeoffs→](/podcast/joao-garcia-cartesi-linux-appchains/) ## Questions this episode answers ### Can Bitcoin staking work without moving BTC through a bridge? In the design David Tse describes, yes. BTC is locked under spending conditions on Bitcoin while another proof-of-stake chain uses the stake for security. At 07:36 he distinguishes this narrow use case from bridging an asset for arbitrary activity on another chain. Bitcoin itself continues to use proof of work. No bridge does not mean no protocol or staking risk. ### How can remote slashing work when Bitcoin cannot inspect another chain? Tse describes designing consensus rules and cryptography so detectable misconduct reveals the signing material needed for a slashing transaction. Bitcoin checks the resulting spending conditions instead of interpreting the other chain’s entire execution history. This is a high-level explanation, not a claim that every fraud type can be punished without protocol-specific rules. The later remote-staking paper details the formal construction and assumptions. ### Is locking BTC with a timelock enough to secure a proof-of-stake chain? No. A confirmed lock transaction shows funds are committed for a period, but the chain also needs enforceable consequences for relevant misconduct. At 10:00 Tse introduces the timelock; he then identifies slashing as the hard part. Withdrawal and unbonding rules must preserve the opportunity to penalize faults before collateral escapes. ### Does Babylon's remote-staking idea require an EVM chain or Cosmos IBC? Tse says the security mechanism operates at consensus level, below the EVM, and rejects the assumption that communication necessarily requires Cosmos IBC. Sending the required Bitcoin transactions is central to his explanation. This does not mean an arbitrary blockchain is already integrated or compatible without adaptation of its consensus and verification rules. ### Is ten percent the fixed slashing rate for Bitcoin staking? No. At 16:23 Tse gives an illustrative 90/10 split across two outputs, followed by other example ratios. Actual slashable fractions depend on the protocol and deployed parameters. The interview’s Ethereum and Cosmos percentage remarks are historical speaker examples, not a current parameter reference or a guarantee of maximum loss. ### Is bridge-free Bitcoin staking safer than lending or free of risk? The interview distinguishes securing consensus from lending to borrowers, but does not establish a universal ranking of safety. Tse argues at 26:56 that slashing is more behavior-dependent than lending exposure. Delegated validator behavior, protocol implementation, withdrawal restrictions and market risk can still affect holders. 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In this September 2023 interview, Stanford professor and Babylon co-founder David Tse explains why staking can avoid a bridge, why a timelock alone is not enough, and how cryptography can turn validator misconduct into a Bitcoin spending condition. He discusses slashable fractions, consensus compatibility and the distinction from lending. Launch plans, market figures and security claims reflect the recording period.", "duration": "PT30M36S", "embedUrl": "https://www.youtube-nocookie.com/embed/0j0eSjSCigg", "hasPart": [ { "@type": "Clip", "endOffset": 208, "name": "Opening highlights and David Tse's research background", "startOffset": 0, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=0" }, { "@type": "Clip", "endOffset": 416, "name": "Why use a non-native asset for proof-of-stake security?", "startOffset": 208, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=208" }, { "@type": "Clip", "endOffset": 553, "name": "How can Bitcoin staking avoid a bridge?", "startOffset": 416, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=416" }, { "@type": "Clip", "endOffset": 774, "name": "What does a Bitcoin timelock prove?", "startOffset": 553, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=553" }, { "@type": "Clip", "endOffset": 954, "name": "Does remote slashing require IBC or a smart-contract VM?", "startOffset": 774, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=774" }, { "@type": "Clip", "endOffset": 1100, "name": "Can only part of a Bitcoin stake be slashable?", "startOffset": 954, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=954" }, { "@type": "Clip", "endOffset": 1298, "name": "Combining consensus research, cryptography and Bitcoin Script", "startOffset": 1100, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=1100" }, { "@type": "Clip", "endOffset": 1580, "name": "Why Bitcoin rather than another chain's asset?", "startOffset": 1298, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=1298" }, { "@type": "Clip", "endOffset": 1673, "name": "How does staking risk differ from lending risk?", "startOffset": 1580, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=1580" }, { "@type": "Clip", "endOffset": 1836, "name": "Web3 research surprises and the next guest's question", "startOffset": 1673, "url": "https://www.youtube.com/watch?v=0j0eSjSCigg&t=1673" } ], "inLanguage": "en", "name": "Bitcoin Staking Without Bridges: How Slashing Works | David Tse", "publisher": { "@id": "https://wavect.io/#organization", "@type": [ "Organization", "ProfessionalService", "LocalBusiness" ] }, "thumbnailUrl": "https://i.ytimg.com/vi/0j0eSjSCigg/maxresdefault.jpg", "transcript": "Opening montage: [Edited opening highlights.] Kevin: Today with David, who's a Stanford professor and co-founder of Babylon. Bitcoin possibly enhancing the security or consensus mechanism of proof-of-stake blockchains. David: In my earlier life I used to do research in wireless infrastructure. Five years ago I read Nakamoto's white paper. Doing research in blockchain consensus protocols, that's our specialty. The more capital, the more secure the blockchain is. Your native token usually has a low market cap. One reason why most Bitcoin is idle is that bridging is considered very high risk. The simple thing you can do on Bitcoin is put it in a so-called timelock deposit. It's called a spending condition. Making this idle asset useful for the rest of the crypto economy. Another important function is triggering the interest of Bitcoin holders. A few months ago there was a new development in the Bitcoin ecosystem called Ordinals.\nKevin: Wavect, the Web3 software company that understands what you want. Hi everyone, welcome at Wavect, today with David, a Stanford professor and co-founder of Babylon, a blockchain using Bitcoin's proof-of-work consensus mechanism. Today we'll talk about Bitcoin possibly enhancing the security or consensus of proof-of-stake blockchains. David wrote at least two papers about this topic. I'm excited to have you here. Thanks for taking the time. Please introduce yourself, let us know what you're working on and whatever you think is worthwhile sharing.\nDavid: Thanks, Kevin, for having me on the program. I've primarily been a researcher. I started as a professor at UC Berkeley and moved to Stanford eight years ago. In my earlier life I researched wireless infrastructure, focusing on making the cellphones we have now work. They didn't work twenty years ago, but now they work, so that's great.\n\nTwenty years later I decided to do other things. Five years ago I read Nakamoto's Bitcoin white paper and found it fascinating from a research perspective. I started assembling a group at Stanford. We now have seven students and postdoctoral researchers working on blockchain consensus protocols. That's our specialty.\n\nWe've collaborated with industry groups, including the Ethereum Foundation, on improving Ethereum's proof-of-stake protocol before the Merge. About a year and a half ago we had the idea that there are advantages to combining Bitcoin security with a proof-of-stake blockchain. That's where Babylon came from, a startup we began about a year and a half ago.\nKevin: Sounds exciting. I researched your project and understand you plan to launch mainnet next year, early next year? [David: We're aiming around the next halving.] The next Bitcoin halving, exciting, great timing.\n\nTo summarize for less technical people, please correct me: most new proof-of-stake blockchains struggle to reach the necessary threshold of staked native assets to provide decent consensus security. Your newest paper, released this month I think, focuses on bringing non-native assets like Bitcoin into that mechanism. Personally, how did you come up with this? It's out of the box. What made you think it was feasible and made sense?\nDavid: For some background, proof of stake is secured by capital. The more capital, the more secure the blockchain. Traditionally a proof-of-stake protocol launches a native token and uses it to secure the blockchain.\n\nThere are issues, especially for a new blockchain. Your native token usually has a low market cap. Low market cap means low security. To improve security, you typically offer high currency inflation to attract investors, increase market cap and increase the value staked. That causes problems for new chains. They want to develop applications, not spend all this inflation on security, which is a means, not the ends of a blockchain.\n\nOur idea is that, in addition to the native token, you can bring in a much larger, in some sense more stable asset like Bitcoin to validate and secure your chain. It's a double win: the proof-of-stake chain has more stable capital to rely on, potentially cheaper because the supply is so large. Bitcoin holders currently earn almost zero yield, just holding it. This gives them an opportunity to earn upside by investing in a proof-of-stake chain and earning its rewards. We think it's a double win.\nKevin: Honestly, my first thought when skimming your paper was: how does this work without facing the security issues bridges or cross-chain protocols face? Especially since Bitcoin isn't EVM-compatible and many proof-of-stake networks are EVM chains. I'd love to know your approach, at a high level or in depth.\nDavid: Let me split your question into several aspects. You're correct: one reason most Bitcoin is idle is that holders consider bridging a very high-risk operation and don't want to bridge from Bitcoin. Most DeFi activity happens elsewhere, so there are few ways to earn yield.\n\nOur design found that for this particular staking use case, you don't need to bridge Bitcoin. Bridging lets you do anything on the other chain but exposes you to bridge risk. If you focus on the specific but important use case of providing security to a proof-of-stake chain, our technology says bridging isn't needed.\n\nOn EVM compatibility, our security happens at the consensus level, one level below the EVM. It doesn't matter whether the chain is EVM or non-EVM; the technology still works.\nKevin: How does it work? I imagine a Bitcoin smart contract, perhaps not so simple, where you stake Bitcoin. The proof-of-stake chain gets some validity proof confirming it was staked, then you get rewards on that chain. That's just my assumption. Could you correct it to your solution?\nDavid: At a high level that's quite correct, but let me elaborate. First, there's no smart contract on Bitcoin, meaning you can't write an arbitrarily complex contract. However, there are simple things you can do. Our technology uses what's simple on Bitcoin to achieve our purpose. That's the challenge.\n\nYou can put Bitcoin into a timelock deposit. Bitcoin Script has the ability to lock it for, say, six months. That means you've entered a transaction on Bitcoin saying this one Bitcoin is locked for six months. Everybody, including the proof-of-stake chain, can see that confirmed transaction. That's the proof you mentioned. It doesn't need fancy technology like a ZK proof, just a confirmed transaction everyone can see. The other chain knows this person has locked one Bitcoin to secure it.\n\nThe key challenge is that staking has an important aspect called slashing. It's like putting down an Airbnb deposit to guarantee you won't trash it. If you behave and leave properly, you get the deposit back. That deposit ensures good behavior.\n\nSimilarly, if you stake one Bitcoin on a proof-of-stake chain, it must be sure you won't trash the chain. It needs the ability to slash, or take away, that Bitcoin or a fraction upon bad behavior, so bad behavior doesn't happen. That's the challenge of the whole problem: how to do slashing.\nKevin: Does communication between those networks happen through Cosmos' Inter-Blockchain Communication protocol?\nDavid: No. Cosmos is an ecosystem we've collaborated with a lot, but the technology works generally. All the communication needs is to send transactions to Bitcoin. We don't need a complicated communication protocol.\nKevin: The funds are slashed on Bitcoin and everything happens there, but how does Bitcoin determine wrongdoing?\nDavid: Exactly. Bitcoin isn't very smart. It can't inspect a proof-of-stake chain to figure out what's happening there. Instead, our design goes the other way: if something bad happens on the other chain, we want anybody to be able to send a Bitcoin transaction to slash the funds.\n\nYour audience may know fraud proofs, for example the rollup technology Arbitrum. Bad behavior on a rollup is sent to the main chain, Ethereum, to slash funds or revert transactions. Our design is somewhat similar: a proof-of-stake relayer sees bad behavior and sends something like a fraud proof back to Bitcoin.\n\nBut there's a huge difference between Bitcoin and Ethereum. [The captions say Bitcoin here; the comparison appears to refer to Ethereum] has smart contracts to process and understand the fraud proof. Bitcoin has no such smart contract. It doesn't understand anything except spending Bitcoin, called a spending condition.\n\nWe have to design our fraud-proof system cryptographically so that Bitcoin only needs to take the message and recognize it as a spending message, and slash based on that message.\nKevin: That answers my next question. I read that you're revealing the private key and wondered how it worked. If ten Bitcoin are staked, you hopefully don't want to slash all ten for one misbehavior. That explains that part.\nDavid: Slashing ten Bitcoin would be the extreme design. It would give very strong security to the proof-of-stake chain, but potentially be scary for the Bitcoin holder. You're trading off the staker's peace of mind and chain security.\n\nThe solution is simple: design the Bitcoin contract so that, for example, ninety percent is timelocked and only ten percent can be slashed. A Bitcoin transaction can have two outputs. One contains ninety percent, locked and withdrawable but not slashable. The other ten percent is also timelocked but can be slashed. That's entirely possible.\nKevin: Can the proof-of-stake chains or their communities choose parameters like this ratio?\nDavid: Correct. That contract is signed between the staker and the chain they want to validate. Different chains can have different parameters: ten percent, five percent or fifty percent slashing. On current chains, Ethereum for example is fairly high, around fifty percent, while Cosmos chains are lower, about five percent. Different chains have different parameters.\nKevin: Research is challenging, especially in cryptography. What was the hardest part of coming up with this? 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