Babylon called it a historic moment. The pool behind that moment held fourteen dollars.
Not fourteen million, fourteen dollars. That was the actual liquidity in the market when Babylon announced its first Trustless Bitcoin Vaults test on Ethereum mainnet through Morpho.
The mechanism itself was real. Native BTC used as collateral to borrow actual USDC, no wrapper, no bridge, Bitcoin locked on its own chain the entire time.
I kept reading past the headline into how the trustless part actually works. Bitcoin does not verify the loan logic or the underlying proof itself, that enforcement happens off chain through a garbled circuit, an encrypted verifier that only catches fraud if someone actually runs it and submits proof in time.
That is a liveness assumption, not a guarantee. If nobody challenges a fake repayment proof quickly enough, the cheat succeeds.
Here is my counterpoint though. This exact tradeoff already exists inside Bitcoin's own Lightning Network, and it has held up reasonably well in practice.
If a Lightning channel party goes offline and their counterparty broadcasts an old, more favorable channel state, the honest party only keeps their funds if someone broadcasts a justice transaction before the timelock expires. Watchtower services exist specifically to close that gap, and users who understand the risk simply run one or rely on a provider that does.
Liveness assumptions are not automatically fatal, they just require someone credible actually watching. The real question is whether Babylon's version has that same density of honest watchers yet, and a fourteen dollar test cannot answer that.
One independent researcher who reviewed the whitepaper directly with Babylon's team laid out the specific conditions a truly trustless Bitcoin loan needs, then showed the design satisfies some of them while still leaning on off chain challenge behavior for the rest.
I do not read that as damning. I read it as the same unfinished question every trust minimized system eventually has to answer once real money shows up.
$BABY #baby @BabylonLabs_io
Not fourteen million, fourteen dollars. That was the actual liquidity in the market when Babylon announced its first Trustless Bitcoin Vaults test on Ethereum mainnet through Morpho.
The mechanism itself was real. Native BTC used as collateral to borrow actual USDC, no wrapper, no bridge, Bitcoin locked on its own chain the entire time.
I kept reading past the headline into how the trustless part actually works. Bitcoin does not verify the loan logic or the underlying proof itself, that enforcement happens off chain through a garbled circuit, an encrypted verifier that only catches fraud if someone actually runs it and submits proof in time.
That is a liveness assumption, not a guarantee. If nobody challenges a fake repayment proof quickly enough, the cheat succeeds.
Here is my counterpoint though. This exact tradeoff already exists inside Bitcoin's own Lightning Network, and it has held up reasonably well in practice.
If a Lightning channel party goes offline and their counterparty broadcasts an old, more favorable channel state, the honest party only keeps their funds if someone broadcasts a justice transaction before the timelock expires. Watchtower services exist specifically to close that gap, and users who understand the risk simply run one or rely on a provider that does.
Liveness assumptions are not automatically fatal, they just require someone credible actually watching. The real question is whether Babylon's version has that same density of honest watchers yet, and a fourteen dollar test cannot answer that.
One independent researcher who reviewed the whitepaper directly with Babylon's team laid out the specific conditions a truly trustless Bitcoin loan needs, then showed the design satisfies some of them while still leaning on off chain challenge behavior for the rest.
I do not read that as damning. I read it as the same unfinished question every trust minimized system eventually has to answer once real money shows up.
$BABY #baby @BabylonLabs_io