Kraken Introduces Native Bitcoin Yield Through Babylon Integration

Bitcoin Yield Without Wrapping or Lending

Kraken has rolled out a new bitcoin staking feature through Babylon, a protocol that enables users to earn passive rewards without needing to wrap, lend, or bridge their BTC. The BTC remains on-chain in a non-custodial, time-locked contract, and participants receive rewards in Babylon’s BABY token. Users can start staking instantly, though unbonding requires a seven-day wait. This new model offers up to 1% APR, allowing BTC to support Proof-of-Stake chains like Solana, Ethereum, and Avalanche by serving as collateral for their security.

Not Traditional Bitcoin Staking

Though referred to as staking, the mechanism doesn't work like PoS staking. Bitcoin remains a Proof-of-Work chain and doesn’t support native staking or inflation-based rewards. Instead, Babylon's model uses time-locked BTC and off-chain coordination to secure other networks, making it more of a bitcoin-backed PoS enhancement than true staking. Rewards are paid in external tokens like BABY, introducing risks such as token volatility, smart contract reliance, and the inability to access BTC during the lock-up period. Kraken ensures that BTC remains on the Bitcoin network, using Taproot scripts for security.

Expanding the Kraken Ecosystem

Kraken’s move follows recent expansions, including launching its Ethereum Layer 2 network Ink, acquiring NinjaTrader for $1.5 billion, and unveiling a new institutional prime brokerage. Kraken also announced plans to offer tokenized stock trading outside the U.S. Babylon has been steadily developing since 2023, completing several funding rounds and launching its mainnet in April 2025. It recently airdropped 600 million BABY tokens to early adopters.