Babylon Bitcoin staking drives BTC fees above $130

A Bitcoin fee bidding war broke out on August 22, as Babylon launched phase one of its native BTC staking offering.

In the early hours of Thursday, August 22, the average Bitcoin (BTC) transaction fee was below $1. By noon, users were having to pay around $132-$137 for a BTC transfer after Babylon’s Bitcoin staking program went live.

Babylon’s BTC staking allows users to earn yield by depositing crypto directly into proof-of-stake (PoS) networks. The idea aims to expand BTC utility beyond the “digital gold” narrative, which encourages holding the asset rather than using it in more active financial strategies.

Phase one of Babylon’s staking system was a “lock-only phase,” where users quickly filled the maximum allocation within hours.

In BTC’s case, as a proof-of-work (PoW) blockchain, miners verify transactions in exchange for fees. Higher fees can incentivize miners to prioritize certain transactions.

The overwhelming interest in joining Babylon’s staking platform has led to an on-chain scramble among users, fueling competition for miner priority and pushing BTC fees close to $140, as confirmed by CryptoQuant analyst JA Maartun.

More than 1,000 BTC worth approximately $61 million have been prepared for the second phase after the race to stake assets. More than 12,700 stakers and 20,610 solo delegates are lined up to earn rewards by securing PoS chains with BTC.

Increasing Bitcoin adoption and utility

Decentralized finance (DeFi) staking is common among PoS chains, allowing crypto holders to earn passive income from their holdings. While this practice is specific to PoS networks, developers are exploring ways to extend it to the Bitcoin ecosystem.

The move effectively expands BTC’s role in DeFi at a time when institutional interest in cryptocurrencies is on the rise. Wall Street giants like BlackRock and Fidelity received approval to launch spot BTC ETFs in January, and since then funds from traditional finance and crypto-native asset managers have amassed over $50 billion in assets.

US presidential candidates have talked about creating a national BTC reserve and institutional ownership was trending upwards by press time.