Aave DAO passed an ARFC proposal on November 9 with 100% approval to support native Bitcoin as collateral for Aave V4 through Babylon’s Trustless Bitcoin Vaults. According to Foresight News, Babylon said BTC holders will be able to lock their native Bitcoin in self-custodial vaults and borrow assets such as USDT and USDC without wrapping tokens or using cross-chain transfers. The proposed collateral factor is 78%, with a 0% risk premium.

Liquidity is expected to come mainly from Aave Core Hub, with an initial stablecoin credit limit of about $21 million that will increase over time. For each 12-month period after integration goes live, Aave DAO will retain the first $500,000 in revenue, with additional revenue shared with Babylon and a portion allocated to token buybacks. For annual revenue between $500,000 and $2 million, the proposed split is 78% for Aave, 18% for Babylon and 4% for the buyback fund. For revenue above $6 million, the split would be 61.5%, 31.5% and 7%, respectively. The buyback fund would allocate 85% to AAVE buybacks and 15% to BABY buybacks.

The proposal will next move to the AIP stage. Mainnet launch is targeted for the end of 2026, with participation and scale initially limited and the rollout planned in phases.