Aave's proposed native Bitcoin lending market could leave suppliers exposed to settlement shortfalls when financing WBTC liquidation payouts, with no funded protection specified. According to NS3.AI, Babylon Labs' Oct. 14 proposal would use shared Aave liquidity to pay outside liquidators before permissioned buyers redeem Bitcoin collateral. TokenLogic's coverage framework assigns any deficit to suppliers of the Hub asset used, unless allocated protection absorbs the loss. The proposal leaves the funding Hub, draw limits and dedicated protection for later decisions. The Aave Request for Comment lists feedback, a conditional Snapshot vote and an eventual on-chain proposal with full risk parameters as subsequent steps.