[TEMP CHECK] Babylon Trustless BTC Vault Integration on Aave V4
This proposal, a 'Temperature Check,' asks the Aave DAO community if it wants to integrate Babylon's Trustless Bitcoin Vaults (TBV) protocol into Aave V4. If approved, this would allow users to use native Bitcoin (BTC) as collateral for loans on Aave without needing to wrap, bridge, or use custodians. The integration would involve deploying two new Aave V4 'Spokes' (Babylon Core Lending Spoke and BTC Vault Swap Spoke) to facilitate this process. Babylon is a project backed by significant venture capital, known for its trustless Bitcoin staking protocol.
Impact: If this proposal passes, Aave users would gain a new, self-custodial way to leverage their native BTC within the Aave ecosystem, potentially increasing Aave's total value locked and attracting more Bitcoin holders. It could also set a precedent for how other native assets are integrated into DeFi. There are no direct financial beneficiaries or losers mentioned in this initial 'Temperature Check' phase, as it's a preliminary discussion.
Read full proposal on Snapshot ↗Author: Babylon Labs Date: 25-5-26
Simple Summary This Temperature Check seeks community input on the deployment of two new Aave V4 Spokes (Babylon Core Lending Spoke and BTC Vault Swap Spoke) to onboard native BTC as collateral, via the Trustless Bitcoin Vaults protocol. In TBV, a depositor locks BTC in a Taproot UTXO on Bitcoin. Redemption is governed by on-chain rules (e.g., the depositor repaid their loan) and settles directly to a Bitcoin UTXO controlled by the redeeming party. No wrapping, no bridging, no custodians.
Background Babylon Babylon was started in 2022 by Professor David Tse…