Babylon Labs Proposes Bitcoin Lending on Aave V4
- Babylon Labs has submitted a proposal to allow users to borrow stablecoins on Aave using native Bitcoin (BTC) as collateral.
- Users would lock their BTC in vaults on the Bitcoin network, with a non-transferable token on Ethereum representing the collateral.
- The proposal is currently at the Aave Request for Comment (ARFC) stage, following a preliminary community vote that passed in June.
- If approved, Aave DAO would receive the first $500,000 in qualifying annual revenue from this integration.
- Aave already supports loans against tokenized Bitcoin like Wrapped Bitcoin (WBTC), which involves counterparty risks due to custodians holding the underlying assets.
The integration aims to enhance lending options by allowing direct use of native BTC without bridging or wrapping it, addressing counterparty risks associated with existing tokenized solutions.
As of now, the proposal awaits community feedback before moving to a voting phase that requires at least 320,000 AAVE-equivalent votes for advancement. (Source)
