@BabylonLabs_io I've been thinking about this one for a bit.
So this whole flow I'm describing comes from Babylon Labs' proposal on the Aave governance forum, submitted back in May 2026. It's still at the temp check stage, not live yet, but the design itself is honestly pretty clean once you break it down.
Lock BTC. You lock your Bitcoin in a Taproot UTXO, directly on the Bitcoin network no bridge, no custodian holding your coins. This is the base of what they call a Trustless Bitcoin Vault (TBV).
Vault activates. Once locked, a mirrored record gets created on Ethereum a transfer-restricted ERC-20 called vaultBTC. It doesn't trade freely; it just moves within the system.
Auto-supply as collateral. That vaultBTC flows straight into the Babylon Core Lending Spoke as collateral, part of Aave V4's Hub-and-Spoke setup. No extra manual step, it's pretty seamless.
Borrow. From here you can borrow stablecoins or WBTC against your BTC position feels like any normal lending market at this point.
Repay. Pay back the loan, your position clears. Nothing fancy.
Redeem back to Bitcoin. Whether things went fine or got liquidated, the BTC Vault Swap Spoke handles settlement, and final redemption happens on Bitcoin itself through a zero-knowledge proof, with a fraud-proof challenge window built in.
End result BTC never actually leaves its native chain, but you still get real DeFi utility out of it. I think that's the part that actually makes this interesting
#baby $BABY
So this whole flow I'm describing comes from Babylon Labs' proposal on the Aave governance forum, submitted back in May 2026. It's still at the temp check stage, not live yet, but the design itself is honestly pretty clean once you break it down.
Lock BTC. You lock your Bitcoin in a Taproot UTXO, directly on the Bitcoin network no bridge, no custodian holding your coins. This is the base of what they call a Trustless Bitcoin Vault (TBV).
Vault activates. Once locked, a mirrored record gets created on Ethereum a transfer-restricted ERC-20 called vaultBTC. It doesn't trade freely; it just moves within the system.
Auto-supply as collateral. That vaultBTC flows straight into the Babylon Core Lending Spoke as collateral, part of Aave V4's Hub-and-Spoke setup. No extra manual step, it's pretty seamless.
Borrow. From here you can borrow stablecoins or WBTC against your BTC position feels like any normal lending market at this point.
Repay. Pay back the loan, your position clears. Nothing fancy.
Redeem back to Bitcoin. Whether things went fine or got liquidated, the BTC Vault Swap Spoke handles settlement, and final redemption happens on Bitcoin itself through a zero-knowledge proof, with a fraud-proof challenge window built in.
End result BTC never actually leaves its native chain, but you still get real DeFi utility out of it. I think that's the part that actually makes this interesting
#baby $BABY