Babylon, a startup led by a Stanford professor and a former Dolby engineer, has secured $18 million in funding to develop a solution that enables users to stake Bitcoin for validating nodes on proof-of-stake networks like Ethereum, Solana, and Polygon. This is a seemingly impossible task as Ethereum's proof-of-stake networks use smart contracts to govern the staking process, which is not natively supported on the Bitcoin blockchain. However, Babylon claims to have found a workaround by using Bitcoin's "time lock" mechanism and existing scripting language to slash collateralized funds without smart contracts. If successful, this innovation could allow proof-of-stake blockchains to utilize the $838 billion worth of Bitcoin in circulation for validating their transactions and potentially reduce security costs.

Babylon Finance has teamed up with Polygon to offer a new method for Bitcoin holders to earn passive income. The partnership will enable BTC holders to stake their coins on Polygon's proof-of-stake network and earn rewards. This could lead to new staking parameters for BTC on the network, such as a lower minimum required amount or a lower rewards return rate. Nevertheless, the demand for passive income on Bitcoin is expected to be high, regardless of any changes made by the network.