Every Bitcoin holder who wanted DeFi exposure used to face the same trade. Wrap the coin, hand it to a custodian, hope the peg holds. Babylon built Trustless Bitcoin Vaults to remove that trade entirely, BTC locks in a Taproot UTXO and never leaves Bitcoin while it borrows through Aave v4.
I read past the announcement and into the actual governance proposal Babylon filed with Aave, and the picture gets more textured. The integration splits into 2 separate spokes. The Core Lending Spoke handles borrowing against locked BTC. The second one, the BTC Vault Swap Spoke, is the piece that manages what happens after a liquidation, and it settles those positions in WBTC, the exact wrapped asset the whole pitch is built to avoid.
A borrower who repays on time never touches a wrapped token. Their coin sits untouched in the vault from open to close. But the moment a position gets liquidated, exit liquidity runs through custodied, wrapped Bitcoin rather than anything native. That's not a flaw Babylon buried, it's written into the spoke design for anyone who reads the proposal instead of the headline.
Babylon isn't overselling the deposit side, native BTC really does stay unwrapped and self custodied while it works as collateral. What the project doesn't yet deliver is an unwrapped exit under stress. Trustless at rest and wrapped in motion turns out to be a more accurate description than "no wrapped assets" on its own.
@BabylonLabs_io $ON $BTW $BABY #baby
I read past the announcement and into the actual governance proposal Babylon filed with Aave, and the picture gets more textured. The integration splits into 2 separate spokes. The Core Lending Spoke handles borrowing against locked BTC. The second one, the BTC Vault Swap Spoke, is the piece that manages what happens after a liquidation, and it settles those positions in WBTC, the exact wrapped asset the whole pitch is built to avoid.
A borrower who repays on time never touches a wrapped token. Their coin sits untouched in the vault from open to close. But the moment a position gets liquidated, exit liquidity runs through custodied, wrapped Bitcoin rather than anything native. That's not a flaw Babylon buried, it's written into the spoke design for anyone who reads the proposal instead of the headline.
Babylon isn't overselling the deposit side, native BTC really does stay unwrapped and self custodied while it works as collateral. What the project doesn't yet deliver is an unwrapped exit under stress. Trustless at rest and wrapped in motion turns out to be a more accurate description than "no wrapped assets" on its own.
@BabylonLabs_io $ON $BTW $BABY #baby