This proposal signals that Osmosis should become a Bitcoin Secured Network (BSN) by integrating Babylon as part of a future upgrade. This will allow Osmosis to leverage the security of Bitcoin while becoming the preferred trading venue for Babylon assets, which by their nature are related to Bitcoin. This chain adjustment aligns with the Bitmosis initiative, making Osmosis a superior location to trade Bitcoin and related assets through increased security and liquidity.

This proposal preapproves parameter changes to allocate 50% of taker fees for Babylon assets as BSN finality provider rewards.

This proposal approves accepting 25 million BABY tokens via the Osmosis Grants Program.

Background

Osmosis governance previously approved an initial integration with Babylon in Proposal 437. This proposal takes this accepted integration further by signalling that Osmosis should become compatible with Babylon at the chain level to become a BSN.

Bitcoin secured networks use Babylon's services to timestamp Osmosis blocks against Bitcoin using Finality Providers on Babylon. These finality providers can be delegated Bitcoin to increase the security provided and earn staking rewards paid by the BSNs they secure.

Key Benefits of Becoming a BSN

Enhanced Security

Osmosis will leverage Bitcoin timestamps to secure consensus data against long-range attacks.

By periodically confirming Osmosis blocks against the Bitcoin blockchain, the chain becomes far more resistant to attacks requiring forks by requiring that Bitcoin security also be compromised.

These timestamps may also result in a shorter unbonding period for OSMO staking being required, as this is a current preventative measure for this kind of attack. This proposal does not signal a reduction; any reduction would be subject to future governance votes.

Token Allocation

By integrating with Babylon, Osmosis gains access to the Babylon ecosystem and the opportunities it will provide within Bitcoin DeFi.

The Osmosis Grants Program will receive 25 million BABY tokens over four tranches, with the first tranche delivered at the Babylon mainnet launch. These funds are received on behalf of the Osmosis DAO to be used at the sole discretion of the Osmosis DAO and the Osmosis Grants Program. These funds are contingent on Osmosis becoming a BSN.

Cost of becoming a BSN

This proposal signals that 50% of trading fees from Babylon ecosystem assets on Osmosis will be allocated to Babylon to reward Finality Providers for providing the BSN service.

Babylon assets are defined as any assets that arrive on Osmosis via Babylon or primarily utilize Babylon's staking mechanism for yield.

These fees will be activated through future governance proposals as parameter changes as each taker fee share agreement can only be activated once an asset begins trading on Osmosis.

No inflationary rewards or other Osmosis community pool assets or revenue will be directed to BSN payments by this proposal.

Implementation Plan

Babylon mainnet is expected to go live soon.

On launch, the Osmosis Grants Program will receive the first allocation of BABY tokens.

Osmosis commits to become a Bitcoin Secured Network in a future software upgrade.

Synchronous with this software upgrade proposal, taker fee share agreement parameter change proposals will be passed to reward finality providers.

Forum Thread: https://forum.osmosis.zone/t/osmosis-to-become-a-bitcoin-secured-network/3557