The world of Bitcoin decentralized finance (DeFi) is taking a major leap forward as Kraken, one of the leading cryptocurrency exchanges, announces native Bitcoin staking through its integration with Babylon—a groundbreaking protocol designed to unlock new utility for BTC.
This development marks a pivotal moment in the evolution of Bitcoin, transforming it from a passive store of value into an active participant in the broader blockchain ecosystem. For the first time, Kraken users can stake their Bitcoin directly on the native chain, leveraging custodial vaults while contributing to the security of emerging proof-of-stake (PoS) networks.
What Is Native Bitcoin Staking?
Traditionally, Bitcoin has served two primary roles: a store of value and a medium of exchange. However, with innovations like Babylon, a third native use case is now emerging—Bitcoin staking.
Unlike previous attempts that required wrapping BTC or moving it off-chain, Babylon enables true on-chain Bitcoin staking. This means users lock their BTC directly on the Bitcoin blockchain using cryptographic safeguards and Bitcoin scripts. The staked coins are then used to secure PoS blockchains through delegation, without compromising Bitcoin’s security model.
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How Kraken’s Bitcoin Staking Works
Kraken’s new staking service leverages Babylon’s infrastructure to allow users to stake their BTC seamlessly across all Kraken platforms—web, mobile, and institutional interfaces.
Here’s how it works:
- Users deposit their BTC into a custodial staking vault managed by Kraken.
- These funds are locked on-chain via Bitcoin-native scripts, ensuring full transparency and immutability.
- The staked BTC is then delegated to secure various PoS networks through Babylon’s protocol.
- In return, stakers earn rewards in BABY, the native token of Babylon Genesis, a Layer 1 blockchain secured by Bitcoin.
One of the most user-friendly aspects of this service is flexibility: users can unstake at any time, though there's an approximate 7-day unbonding period to ensure network stability and prevent sudden withdrawals that could impact security.
Mark Greenberg, Kraken’s Global Head of Consumer, emphasized the dual benefit:
“With this launch, clients can earn a return on their BTC while also enabling emerging PoS blockchains to benefit from the economic weight of bitcoin in order to validate transactions and bolster the security of their networks.”
This mechanism represents a significant shift—Bitcoin is no longer just digital gold; it's becoming digital infrastructure.
The Rise of Bitcoin DeFi
Bitcoin DeFi refers to decentralized financial applications built around or leveraging Bitcoin’s security and value. While Ethereum and other smart contract platforms have dominated DeFi for years, Bitcoin’s vast market cap and unmatched security make it an ideal backbone for next-generation protocols.
According to a March 2025 report by Binance Research, less than 0.8% of the total Bitcoin supply is currently engaged in DeFi activities. This leaves a massive untapped opportunity for innovation and yield generation.
The report states that Bitcoin’s role in DeFi is poised to expand dramatically, especially as protocols like Babylon enable secure, non-custodial, and trust-minimized interactions between Bitcoin and other blockchains.
Kraken isn’t alone in recognizing this potential. Competitor Binance has also launched a similar Bitcoin staking product via Babylon, signaling growing industry consensus about BTC’s future beyond passive holding.
Why This Matters for Crypto Investors
For investors, the ability to earn yield on Bitcoin without sacrificing security or decentralization is transformative. Historically, those who held BTC had to choose between:
- Holding statically and relying solely on price appreciation.
- Moving funds into wrapped versions (e.g., WBTC) on Ethereum-based DeFi platforms—introducing counterparty risk and complexity.
Now, with native staking via Babylon on Kraken, users can:
- Maintain exposure to BTC price gains.
- Earn additional yield through BABY rewards.
- Support the security of emerging PoS ecosystems.
- Do so entirely within the Bitcoin security model.
This opens doors for long-term holders, institutions, and yield-seeking retail investors alike.
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Security and Trust: On-Chain Safeguards
A critical concern in any staking solution is security. Babylon addresses this by ensuring all operations are fully on-chain, governed by verifiable Bitcoin scripts rather than off-chain agreements or centralized intermediaries.
Cryptographic safeguards prevent malicious behavior, including double-signing or unauthorized delegation. Additionally, because staked BTC remains on the native chain, there's no need for cross-chain bridges—which are often targeted by hackers.
Kraken’s custodial model ensures ease of use for mainstream users while maintaining high compliance and operational standards. The exchange has offered custodial staking since 2019 and has a proven track record in secure asset management.
Core Keywords Driving This Trend
The key concepts shaping this new era of Bitcoin utility include:
- Bitcoin staking
- BTC DeFi
- Native chain staking
- Babylon protocol
- Proof-of-stake (PoS)
- Layer 1 blockchain
- Cryptocurrency yield
- On-chain security
These keywords reflect both technical innovation and shifting investor behavior—highlighting how search trends around “Bitcoin yield” and “BTC staking platforms” have surged over the past year.
Frequently Asked Questions (FAQ)
Can I still access my Bitcoin after staking?
Yes. You can initiate an unstake request at any time. However, there is an approximate 7-day unbonding period before your BTC becomes fully available again.
Are there risks involved in Bitcoin staking via Babylon?
The primary risk is opportunity cost during the unbonding period. Technically, the system is secured by Bitcoin’s consensus rules and cryptographic enforcement, minimizing counterparty and slashing risks.
Do I earn Bitcoin or another token?
Rewards are paid in BABY, the native token of Babylon Genesis. This token incentivizes participation and secures the interoperability layer between Bitcoin and PoS chains.
Is this available worldwide?
Staking availability may vary by jurisdiction due to regulatory requirements. Check Kraken’s platform for region-specific access.
How does this differ from Ethereum staking?
Unlike Ethereum staking—which requires locking ETH to validate blocks—Bitcoin staking via Babylon allows BTC to remain on its native chain while indirectly securing other networks. It does not involve validating Bitcoin transactions.
Can I use this on mobile?
Yes. The feature is available across all Kraken platforms, including iOS and Android apps.
The Future of Bitcoin Utility
Kraken’s move underscores a broader trend: Bitcoin is evolving into a foundational layer for decentralized finance. With protocols like Babylon unlocking secure, non-invasive ways to utilize BTC’s economic weight, we’re entering a new phase where holding Bitcoin can be both safe and productive.
As adoption grows and more capital flows into BTC-backed DeFi solutions, expect increased competition among exchanges and wallet providers to offer seamless staking experiences.
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This isn’t just about earning rewards—it’s about redefining what Bitcoin can do in the global digital economy.