Hassan Maishera
On Wednesday, Aave Labs announced via X that a new proposal has been submitted seeking to onboard native BTC as collateral on Aave V4 through Babylon Trustless Bitcoin Vaults.
If approved, users can lock their native BTC on the Bitcoin chain and borrow supported assets against it. The integration deploys two new Aave V4 Spokes, the Babylon Spoke and the BTC Vault Swap Spoke, and lists native BTC as the sole collateral asset of the Babylon Spoke. The first use case is borrowing stablecoins against native BTC. Risk parameters for both Spokes will be provided by Aave’s risk service providers.
Babylon was started in 2022 by Stanford University Professor David Tse and Dr. Fisher Yu, with a vision of a Bitcoin-backed crypto economy built on trustless protocols that unlock Bitcoin’s productivity without bridges, wrappers, or custodians.
The project is best known for its Bitcoin staking protocol, which lets BTC holders stake their BTC to secure other chains and rollups, provide economic security and earn staking rewards.
Aave is a decentralized finance protocol that allows people to lend and borrow crypto. Lenders earn interest by depositing digital assets into specially created liquidity pools. Borrowers can then use their crypto as collateral to take out a flash loan using this liquidity.
Aave (which means “ghost” in Finnish) was originally known as ETHLend when it launched in November 2017, but the rebranding to Aave happened in September 2018. (This helps explain why this token’s ticker is so different from its name!)
AAVE provides holders with discounted fees on the platform, and it also serves as a governance token — giving owners a say in the future development of the protocol.
Aave protocol is a decentralized, open-source, and non-custodial money market protocol. Depositors earn interest by providing liquidity to lending pools, while borrowers can obtain overcollateralized loans by using the liquidity from these pools. AAVE is trading at $149.85 per token, down 6.5% in the last 24 hours.
The project allows people to borrow and lend in about 20 cryptocurrencies, meaning that users have a greater amount of choice. One of Aave’s flagship products is “flash loans,” which have been billed as the first uncollateralized loan option in the DeFi space. There’s a catch: they must be paid back within the same transaction.
