Babylon is pushing Bitcoin beyond passive yield and into the heart of on‑chain finance — backed by a fresh $15 million bet from a16z Crypto. The venture firm bought native BABY tokens on Dec. 7, 2025, signaling confidence in Babylon’s plan to evolve from a single-purpose staking protocol into a broader, native-Bitcoin financial stack. Why it matters - Babylon wants to make BTC usable as verifiable on‑chain collateral for lending and other DeFi primitives — without wrapped tokens, custodial bridges, or reliance on third‑party issuers. That could unlock a portion of the roughly $1.4 trillion in largely idle Bitcoin capital and route it into lending, credit and other capital‑efficient use cases while keeping security anchored to Bitcoin’s base layer. - a16z framed its investment as support for technically driven infrastructure that could be a neutral alternative to wrapped‑BTC models, which introduce counterparty and settlement risks via custodians and issuers. What Babylon is building - Trustless BTCVaults: Babylon is expanding into lending via “Trustless BTCVaults,” a design that lets Bitcoin serve as on‑chain collateral without bridges or wrappers. The system uses advanced cryptographic primitives — including witness encryption and garbled circuits — to enable conditional execution tied directly to Bitcoin transactions. In plain terms, those tools help enforce contract conditions on other chains or systems based on verifiable Bitcoin events, without moving BTC off‑chain or into synthetic representations. - The goal is native interoperability: let BTC participate in DeFi while remaining native to the Bitcoin network and preserving Bitcoin’s core security assumptions. Track record and team - Babylon began as a Bitcoin staking protocol that allowed holders to earn yield without transferring assets off Bitcoin. It has seen strong demand: prior staking caps exceeded $2 billion in total value locked, with participation from institutional custodians such as BitGo and exchange partners including Kraken. - The project was founded by Stanford professor David Tse and engineer Fisher Yu. Tse’s academic pedigree and long-standing mentorship of crypto founders and researchers was cited by a16z as part of the rationale for its backing. DeFi integrations on the horizon - Babylon’s native‑BTC ambitions already include a notable partnership: in early December 2025 Babylon and Aave announced plans to support native Bitcoin as collateral on Aave V4. The integration—Aave’s first Bitcoin‑backed “Spoke”—would let users borrow and lend against BTC without converting it into ERC‑20 tokens. The launch is targeted for around April 2026. - If successful, the move could open new markets on Bitcoin’s base layer, with potential future extensions into perpetual futures, stablecoins and other financial primitives built directly on BTC. Bottom line a16z’s $15 million purchase of BABY tokens is a clear signal that investors see value in extending Bitcoin’s utility beyond staking while minimizing extra custody and counterparty exposure. Babylon’s cryptographically driven approach aims to make Bitcoin native to DeFi use cases — a development that, if it scales, could shift meaningful liquidity onto protocols that preserve Bitcoin’s core security model. Read more AI-generated news on: undefined/news

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