Babylon Moves Bitcoin Lending Proposal Forward on Aave V4
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Article
Written by:
- Ezra Reguerra, staff writer
- Yohan Yun, staff editor
Published: October 15, 2026
Babylon, a Bitcoin-focused developer, has advanced its proposal to bring native Bitcoin (BTC) collateral to Aave V4, entering a new governance stage. However, further votes and security reviews are required before launch.
The proposal outlines a system where users lock their BTC in vaults on the Bitcoin network and borrow against it on Aave, represented by a non-transferable token on Ethereum. This avoids bridging or wrapping BTC, mitigating counterparty risks associated with wrapped tokens like Wrapped Bitcoin (WBTC).
Following an initial submission in May and a community vote passing in June, the proposal is now at the Aave Request for Comment (ARFC) stage. It requires community consensus before proceeding to a three-day offchain Snapshot vote, followed by a formal onchain vote.
Aave already supports Bitcoin loans through tokenized representations like WBTC and Coinbase Wrapped Bitcoin (cbBTC). However, these rely on custodians, introducing risks. Babylon's proposal offers an alternative, potentially revolutionizing Bitcoin lending on DeFi platforms.
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- Aave launches V4 on Avalanche, laying groundwork for tokenized credit markets
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