Many BTC holders understand “wrapping” as a simple exchange, but behind it lies an additional layer of new trust relationships.
When native BTC is exchanged for mapped assets like WBTC, what users use in DeFi is no longer Bitcoin itself, but a set of claims supported by custodians and minting/redemption mechanisms. As long as any part of this chain goes wrong, the mapped asset may deviate from the value of native BTC. If users then need to transfer the assets via a cross-chain bridge, it further increases the risks related to smart contracts and intermediaries.
Babylon’s Trustless Bitcoin Vaults (TBV) aims to bypass these steps. TBV allows native BTC to remain in the Bitcoin network while connecting its collateral value to Aave v4. Users don’t need to wrap or bridge first, nor do they need to sell their BTC—instead, they can borrow supported assets such as USDC and USDT.
The significance isn’t just that there are fewer operations. Long-term holders can gain liquidity while keeping their BTC exposure and control, and improve capital efficiency by leveraging DeFi market lending and borrowing interest rates. Lending applications use the value of BTC collateral, rather than requiring users to hand their Bitcoin to a centralized institution and then receive a custodial receipt in return.
Self-custody doesn’t mean there are no interest-rate and liquidation risks, but TBV reduces reliance on the issuers of wrapped assets, cross-chain bridges, and centralized intermediaries. What it truly changes is this: native BTC doesn’t have to be converted into another asset first in order to enter on-chain lending markets.
Currently, the public testnet for TBV is live. Users can test creating vaults, collateralizing BTC, borrowing through Aave v4, repaying, and redeeming, and submit their experience feedback to the team via the feedback form.
@BabylonLabs_io $BABY #baby
When native BTC is exchanged for mapped assets like WBTC, what users use in DeFi is no longer Bitcoin itself, but a set of claims supported by custodians and minting/redemption mechanisms. As long as any part of this chain goes wrong, the mapped asset may deviate from the value of native BTC. If users then need to transfer the assets via a cross-chain bridge, it further increases the risks related to smart contracts and intermediaries.
Babylon’s Trustless Bitcoin Vaults (TBV) aims to bypass these steps. TBV allows native BTC to remain in the Bitcoin network while connecting its collateral value to Aave v4. Users don’t need to wrap or bridge first, nor do they need to sell their BTC—instead, they can borrow supported assets such as USDC and USDT.
The significance isn’t just that there are fewer operations. Long-term holders can gain liquidity while keeping their BTC exposure and control, and improve capital efficiency by leveraging DeFi market lending and borrowing interest rates. Lending applications use the value of BTC collateral, rather than requiring users to hand their Bitcoin to a centralized institution and then receive a custodial receipt in return.
Self-custody doesn’t mean there are no interest-rate and liquidation risks, but TBV reduces reliance on the issuers of wrapped assets, cross-chain bridges, and centralized intermediaries. What it truly changes is this: native BTC doesn’t have to be converted into another asset first in order to enter on-chain lending markets.
Currently, the public testnet for TBV is live. Users can test creating vaults, collateralizing BTC, borrowing through Aave v4, repaying, and redeeming, and submit their experience feedback to the team via the feedback form.
@BabylonLabs_io $BABY #baby