Blockchain Protocols Under Scrutiny: Babylon Security Vulnerability and Institutional Integration at Canton

Security Vulnerability Threatens Babylon Consensus

A newly discovered software vulnerability in the Bitcoin staking protocol Babylon could enable malicious validators to disrupt parts of the consensus process and slow down block production during critical phases ^[3]. The security flaw affects Babylon's BLS vote extension schema, which serves to prove that validators agree on a block ^[3].

The bug allows malicious validators to intentionally omit the block hash field when submitting their vote extension, which could lead to consensus issues during the network's epoch boundaries ^[3]. The block hash field informs validators which blocks they are actually voting for during the consensus process – a field whose omission the bug enables ^[3].

Through this vulnerability, a malicious validator could theoretically crash other validators during critical consensus checks at epoch boundaries, leading to a slowdown in block production if multiple validators were affected ^[3]. Pseudonymous contributor GrumpyLaurie55348, who discovered the vulnerability, described the issue: "Intermittent validator crashes at epoch boundaries that would slow down the creation of the epoch boundary block" ^[3].

The bug has not been described as actively exploited to date, but developers warned it could be abused if not fixed ^[3]. Despite the technical challenges, Babylon received $15 million in funding from a16z Crypto earlier this week through the sale of BABY tokens to support the continued development of Bitcoin-native DeFi infrastructure ^[3].

JPMorgan Chooses Canton Over XRP Ledger

Meanwhile, JPMorgan has brought its bank-issued deposit token JPM Coin to the Canton Network following its launch on Base ^[1]. The token will be issued, transferred, and redeemed there via the Kinexys platform ^[1]. The move aims to settle regulated digital money in near real-time – while maintaining compliance, privacy, and institutional control ^[1].

Canton was designed to allow financial institutions to use shared infrastructure without having to disclose sensitive data ^[1]. The decision by the world's largest bank by market capitalization to favor Canton over the XRP Ledger has sparked discussions about which network is better suited for institutional use in the long term ^[1].

Canton places greater emphasis than Ripple on privacy, modular composability, and regulatory adaptable structures – aspects that are often critical for large banks before they move activities on-chain ^[1]. Naveen Mallela, Global Co-Head of Kinexys by J.P. Morgan, explained: "JPM Coin offers the security of bank-owned deposits and settlements, combined with the speed and innovation of around-the-clock, near real-time blockchain transactions" ^[1].

Bittensor: Decentralized AI Training Gains Momentum

Parallel to these developments, the decentralized AI training protocol Bittensor is generating buzz in the frontier AI community ^[2]. Jack Clark, Co-Founder of Anthropic and former Policy Director at OpenAI, recently referenced an analysis by Epoch AI showing that decentralized training runs are growing at 20x per year, compared to 5x growth for centralized frontier models like GPT or Claude ^[2]. Since 2020, the computational power of decentralized projects has increased by a factor of 600,000 ^[2].

However, current decentralized runs are still approximately 1,000 times smaller than frontier models ^[2]. Bittensor underwent its first halving in December 2025, with daily TAO emissions dropping from 7,200 to 3,600 tokens ^[2]. Binance Japan recently listed TAO as one of fewer than 40 assets to pass the regulatory filter in one of the world's most restrictive crypto markets ^[2].

The three developments demonstrate the varying maturity levels of blockchain protocols: While Babylon struggles with technical growing pains, JPMorgan's Canton integration demonstrates the institutional acceptance of privacy-focused solutions.