PANews May 26 - Babylon Labs has kicked off a temperature check proposal in the Aave community, suggesting the integration of native Bitcoin as collateral on Aave V4 via the Babylon Trustless Bitcoin Vaults protocol. This scheme bypasses the need for wrapping, cross-chain bridges, or custodians; users lock their Bitcoin in Taproot UTXOs, with redemptions governed by on-chain rules (like loan repayments), settling directly to Bitcoin UTXOs. The proposal rolls out two Aave V4 Spokes: the Babylon Core Lending Spoke (for lending) and the BTC Vault Swap Spoke (for post-liquidation settlements). Collateral exists in the form of vaultBTC, a restricted transfer ERC-20 token that can only move between whitelisted addresses. In the liquidation process, liquidators can immediately settle with WBTC, while arbitrageurs handle the Bitcoin side of the redemption.