Babylon Proposes Native Bitcoin Integration on Aave V4 Without Bridges or Custody

According to ChainCatcher, Babylon Labs has submitted a temperature check proposal to integrate native Bitcoin as collateral on Aave V4 through its Trustless Bitcoin Vaults protocol. The solution requires no wrapping, cross-chain bridges, or custodians; users lock Bitcoin in Taproot UTXOs with redemption controlled by on-chain rules and settled directly to Bitcoin UTXOs.

The integration deploys two Aave V4 Spokes: Babylon Core Lending Spoke for lending operations and BTC Vault Swap Spoke for post-liquidation settlement. Collateral exists as vaultBTC, a transfer-restricted ERC-20 token that can only move between whitelisted addresses.