- Trustless BTCVault goals to make use of Bitcoin as on-chain collateral with out the usage of wrappers or custodians.
- Babylon staking beforehand reached greater than $2 billion in complete locked up.
- Integration with Aave V4 will carry native Bitcoin collateral to DeFi by April 2026.
Babylon is trying to develop the function of Bitcoin in on-chain finance with new backing from enterprise capital agency a16z Crypto.
This funding will help Babylon’s transition from a single-purpose staking platform to a broader monetary infrastructure constructed instantly on prime of Bitcoin.
Somewhat than focusing solely on yield, the mission positions BTC as collateral that can be utilized throughout lending and different decentralized functions with out counting on wrapped tokens or custodial bridges.
The change displays a rising motion throughout the cryptocurrency market to unlock capital efficiencies from Bitcoin’s massive however largely inactive provide, whereas locking safety into the Bitcoin community itself.
a16z crypto funding
On December seventh, a16z Crypto revealed a $15 million funding in Babylon, made by way of the acquisition of Babylon’s native BABY token.
Babylon was initially developed as a Bitcoin staking protocol that permits BTC holders to earn revenue with out transferring their property from the Bitcoin community.
The corporate stated the funding displays its confidence in Babylon’s strategy to extending Bitcoin’s capabilities past staking whereas sustaining Bitcoin’s core safety premises.
a16z positioned the mission as a possible impartial various to the wrapped BTC mannequin that at present dominates decentralized finance however introduces dependencies on issuers, custodians, or multi-signature constructions.
Trustless BTCVault Description
Babylon is at present increasing into lending infrastructure by way of one thing known as Trustless BTCVault.
These vaults are designed to permit Bitcoin to function verifiable on-chain collateral with out bridges, wrappers, or custodians.
This structure depends on cryptographic instruments reminiscent of witness encryption and circuit garbling to allow conditional execution tied on to Bitcoin transactions.
Its objective is to permit Bitcoin to work together with decentralized functions whereas remaining native to its personal community.
In response to a16z, this design has the potential to cut back counterparty and settlement dangers that happen when BTC is represented on different blockchains by way of artificial tokens.
Babylon’s strategy targets the estimated over $1.4 trillion in Bitcoin capital at present sitting idle by making Bitcoin out there for lending, credit score, and different capital-efficient use instances.
Founder and expertise roots
Babylon was based by David Tse and Fisher Yu.
Mr. Tse is a professor at Stanford College and is understood for his educational work in info idea and blockchain analysis.
a16z highlighted Tse’s long-standing function in mentoring cryptocurrency founders and researchers as a part of the rationale for supporting the mission.
The corporate framed this funding as help for technology-driven infrastructure that may reshape the best way Bitcoin integrates with decentralized finance, moderately than an incremental enchancment to present staking fashions.
From staking to DeFi integration
Babylon’s staking protocol has attracted nice demand so far.
Earlier staking caps noticed the entire quantity locked attain greater than $2 billion, with participation from institutional buyers reminiscent of BitGo and buying and selling companions reminiscent of Kraken.
Extra not too long ago, improvement has shifted to BTCVault and native Bitcoin lending.
In early December 2025, Babylon and Aave introduced that native Bitcoin will probably be used as collateral for Aave V4.
The proposed integration contains Aave’s first Bitcoin-backed “spoke,” which permits lending and borrowing in opposition to BTC with out changing it to an ERC-20 token.
The launch is scheduled for round April 2026.
If profitable, it may open up a brand new decentralized monetary market constructed instantly on prime of Bitcoin’s base layer, permitting for growth into perpetual futures, stablecoins, and different monetary primitives.