Babylon's Trustless Bitcoin Vault lets Bitcoin holders use their assets as collateral in decentralized finance without giving up custody. Currently, using Bitcoin in DeFi requires wrapping the asset or trusting a third party. The TBV protocol solves this by keeping the Bitcoin on its native network.
โUsers lock their Bitcoin in a self-custodial vault using pre-signed transactions and cryptographic proofs. The Bitcoin remains in a segregated output that the depositor co-signs. It is never pooled or lent out to other entities. If a user supplies collateral to a lending protocol, the rules of that specific protocol trigger any necessary liquidations.
โThis system shifts trust from human custodians to the Bitcoin network and cryptography. Bitcoin holders can mint stablecoins, borrow assets, or trade derivatives while maintaining full control of their private keys. This turns idle Bitcoin into active capital.