Spent some time looking at Babylon's testnet documentation and one thing stood out the protocol explicitly recommends splitting your BTC into two vaults: one "sacrificial" and one "protected."

The sacrificial vault sits first in liquidation order. If things go wrong, that one gets taken. The protected one stays untouched if the liquidation is small enough.

That design choice reveals something about the adoption they're actually preparing for. Babylon's 2025 traction showed strong supply-side interest — 135,000 addresses participated, Cap-1 filled in 74 minutes. The staking side worked.

The borrowing side is different.

The protocol built an elaborate system to keep BTC native no wrapping, no bridging, no custodian. But the documentation effectively tells users: "Your BTC might get liquidated, so split it just in case."

Here's the contradiction that stuck with me: the real friction isn't custody risk anymore. It's liquidation anxiety. Babylon removed one barrier but introduced another the mindshare required to manage debt and the possibility of losing part of your BTC.

A BTC vault is a single UTXO it can only be seized whole, never in fractions. That's a Bitcoin constraint, not a design flaw. But it's exactly why the sacrificial vault exists.

The mindshare Bitcoin holders carry around risk wasn't built overnight. Years of conditioning and cautionary stories don't disappear with better UI.

Staking asks holders to commit BTC. Borrowing asks them to live with liquidation — and the mindshare that comes with it. TBV can explain the structure. It cannot remove the psychology.
@BabylonLabs_io #baby $BABY
Would you split BTC into a "sacrificial" vault?