#baby $BABY @BabylonLabs_io From Locked BTC to Borrowed Capital: The Lending Workflow
WBTC and Coinbase's wrapped BTC combined still total less than a third of the ETH tokens deposited on Aave. The bottleneck was never demand — it was a missing architecture for native BTC collateral.
Babylon's lending design works in four stages. First, a borrower deposits BTC into his own vault and posts the vault's metadata to a lending-enabled chain. Second, a light client verifies the deposit, and the chain mints an internal accounting token, collBTC, representing the locked BTC one-to-one. Third, that collBTC is deposited into an existing lending protocol, backing a loan in stablecoin or another asset. Fourth, on repayment, the loan closes, the collBTC is burned, and a zero-knowledge proof of that burn is submitted back to the Bitcoin vault — releasing the original BTC after a timeout.
Liquidation follows the same proof-based path in reverse, run by a whitelisted liquidator rather than the borrower.
Nowhere in this flow does BTC touch a custodian. What would it take for you to trust collateral you never technically had to hand over?
WBTC and Coinbase's wrapped BTC combined still total less than a third of the ETH tokens deposited on Aave. The bottleneck was never demand — it was a missing architecture for native BTC collateral.
Babylon's lending design works in four stages. First, a borrower deposits BTC into his own vault and posts the vault's metadata to a lending-enabled chain. Second, a light client verifies the deposit, and the chain mints an internal accounting token, collBTC, representing the locked BTC one-to-one. Third, that collBTC is deposited into an existing lending protocol, backing a loan in stablecoin or another asset. Fourth, on repayment, the loan closes, the collBTC is burned, and a zero-knowledge proof of that burn is submitted back to the Bitcoin vault — releasing the original BTC after a timeout.
Liquidation follows the same proof-based path in reverse, run by a whitelisted liquidator rather than the borrower.
Nowhere in this flow does BTC touch a custodian. What would it take for you to trust collateral you never technically had to hand over?