- Trustless BTCVaults aim to make disclose of Bitcoin as on-chain collateral without wrappers or custodians.
- Babylon’s staking previously reached over $2 billion in total cost locked.
- An integration with Aave V4 is anticipated to elevate native Bitcoin collateral to DeFi by April 2026.
Babylon is transferring to widen Bitcoin’s characteristic in on-chain finance, following new backing from enterprise capital agency a16z Crypto.
The investment supports Babylon’s transition from a single-cause staking platform toward a broader monetary infrastructure constructed straight on Bitcoin.
In space of focusing fully on yield, the challenge is positioning BTC as usable collateral throughout lending and other decentralised functions, without relying on wrapped tokens or custodial bridges.
The shift displays a rising push throughout crypto markets to free up capital effectivity from Bitcoin’s orderly but largely inactive present, whereas keeping security anchored to the Bitcoin network itself.
a16z crypto investment
On Dec. 7, a16z Crypto disclosed a $15 million investment in Babylon, made by the buy of Babylon’s native BABY tokens.
Babylon became at the birth developed as a Bitcoin staking protocol that permits BTC holders to obtain yield without transferring resources off the Bitcoin network.
The agency said the investment displays self assurance in Babylon’s manner to extending Bitcoin’s efficiency previous staking, whereas preserving Bitcoin’s core security assumptions.
a16z positioned the challenge as a in all probability neutral replace to wrapped BTC devices, which currently dominate decentralised finance but introduce reliance on issuers, custodians, or multi-signature structures.
Trustless BTCVaults defined
Babylon is now expanding into lending infrastructure by what it calls Trustless BTCVaults.
These vaults are designed to enable Bitcoin to behave as verifiable on-chain collateral without bridges, wrappers, or custodians.
The structure depends on cryptographic tools equivalent to gape encryption and garbled circuits to enable conditional execution tied straight to Bitcoin transactions.
The aim is to let Bitcoin work along with decentralised functions whereas finest native to its have network.
In accordance with a16z, this originate would possibly per chance perchance perchance perchance also decrease counterparty and settlement risks that come up when BTC is represented on other blockchains by synthetic tokens.
Babylon’s manner targets the orderly pool of Bitcoin capital that currently sits lazy, estimated at more than $1.4 trillion, by making it usable in lending, credit score, and other capital-efficient disclose cases.
Founders and technical roots
Babylon became founded by David Tse and Fisher Yu.
Tse is a professor at Stanford College and is identified for his academic work in data thought and blockchain be taught.
a16z highlighted Tse’s prolonged-standing characteristic in mentoring crypto founders and researchers as phase of its rationale for backing the challenge.
The agency framed the investment as make stronger for technically pushed infrastructure that can even reshape how Bitcoin integrates with decentralised finance, reasonably than incremental improvements to fresh staking devices.
From staking to DeFi integration
Babylon’s staking protocol has previously drawn critical demand.
Earlier staking caps recorded more than $2 billion in total cost locked, with participation from institutional custodians equivalent to BitGo and replace partners collectively with Kraken.
Extra now not too prolonged ago, pattern has shifted toward BTCVaults and native Bitcoin lending.
In early December 2025, Babylon and Aave presented that native Bitcoin would possibly per chance perchance presumably be weak as collateral on Aave V4.
The proposed integration contains Aave’s first Bitcoin-backed “Spoke”, enabling borrowing and lending against BTC without changing it into ERC-20 tokens.
The birth is anticipated around April 2026.
If winning, it’d also open unique decentralised finance markets constructed straight on Bitcoin’s unfavorable layer, with in all probability extensions into perpetual futures, stablecoins, and other monetary primitives.
