spent some time today trying to understand a part of TBV that confused me at first - once your BTC is actually locked in a vault, how does Aave even "see" it. bitcoin and ethereum dont talk to each other natively, so theres gotta be something bridging the accounting, right. turns out theres a token for that, called vaultBTC, and its weirder then i expected.
when a vault activates, the BTC Vault Manager notifies the Aave v4 Adapter. that adapter then mints an internal token - vaultBTC – sized to the vaults BTC amount, and supplies it into whats called the Babylon Core Spoke. this is basically a dedicated Aave v4 market thats built specifically to accept vaultBTC as collateral. once thats supplied, the vault gets appended to the depositors borrowing position, and from there they can borrow stablecoins or WBTC against it.
heres the part that threw me off tho – vaultBTC isnt a normal token at all. its not transferable to random addresses, it has no secondary market, and it literally never shows up outside the Aave adapter contracts. you cant just go send it to a friend or trade it on a dex. its purely an internal accounting construct.
and honestly once i thought about it more, that makes sense. a BTC vault is one single indivisible Bitcoin UTXO - you cant chop it up or move fractions of it around. but Aave's whole system is built to think in fungible, divisible balances. so vaultBTC exists purely to translate something thats indivisible , and only move an internal marker on the ethereum side.
#baby @BabylonLabs_io $BABY
when a vault activates, the BTC Vault Manager notifies the Aave v4 Adapter. that adapter then mints an internal token - vaultBTC – sized to the vaults BTC amount, and supplies it into whats called the Babylon Core Spoke. this is basically a dedicated Aave v4 market thats built specifically to accept vaultBTC as collateral. once thats supplied, the vault gets appended to the depositors borrowing position, and from there they can borrow stablecoins or WBTC against it.
heres the part that threw me off tho – vaultBTC isnt a normal token at all. its not transferable to random addresses, it has no secondary market, and it literally never shows up outside the Aave adapter contracts. you cant just go send it to a friend or trade it on a dex. its purely an internal accounting construct.
and honestly once i thought about it more, that makes sense. a BTC vault is one single indivisible Bitcoin UTXO - you cant chop it up or move fractions of it around. but Aave's whole system is built to think in fungible, divisible balances. so vaultBTC exists purely to translate something thats indivisible , and only move an internal marker on the ethereum side.
#baby @BabylonLabs_io $BABY