Source: Babylon

The leading Bitcoin infrastructure protocol Babylon, through its team Babylon Labs, today announced a strategic partnership with Aave Labs. The two parties will build a Spoke supported by native Bitcoin on Aave V4 (the next-generation lending architecture developed by Aave Labs). This architecture adopts a Hub and Spoke model, aimed at supporting markets built for specific scenarios.

This integration will allow native Bitcoin to be used as collateral on a large scale in the Aave lending market through the Babylon Bitcoin vault, marking an important milestone for the assetization of Bitcoin in the global on-chain financial market. Babylon's Bitcoin vault can securely lock native Bitcoin in the Bitcoin network, allowing it to be used as collateral in Aave V4 without relying on centralized custody or wrapped tokens.

Bitcoin-based lending has developed into a multi-billion dollar market. Just this year, mainstream platforms have issued over $1 billion in Bitcoin-backed loans, and the industry predicts that as institutional participation increases, the total scale of the Bitcoin lending market will expand to tens of billions of dollars. Despite rapid growth, most Bitcoin lending still relies on centralized custodians and wrapped assets. Native, trustless Bitcoin collateral has long been difficult to achieve—until today. Wrapped Bitcoin and centralized custody introduce additional counterparty risks and operational complexities, limiting Bitcoin's participation in non-custodial DeFi lending markets.

Through this collaboration, Babylon will develop a dedicated Bitcoin-supported Spoke for Aave V4, providing Bitcoin holders with a trustless lending pathway while maintaining the native security model of Bitcoin. Aave Labs will provide architectural guidance, risk assessment, and collaboration on access process design during the development.

The two parties plan to jointly launch the product in April 2026, with the specific timing depending on community governance approval and final deployment progress. Testing of the integration is expected to start in the first quarter of 2026, with relevant technical details gradually disclosed to the community as progress is made.

"The trustless Bitcoin vault allows native Bitcoin to participate directly in the DeFi ecosystem while maintaining its fundamental security guarantees," said David Tse, co-founder of Babylon. "The integration with Aave V4 provides an immediate and significant application scenario for this technology, bringing native Bitcoin liquidity into one of the most mature lending markets in the ecosystem. This collaboration reflects our shared belief that Bitcoin can play a more important role in DeFi through secure and scalable infrastructure. This marks a key step forward for Bitcoin, not just as a store of value, but as a productive component of a global settlement system."

"The Aave V4 market built by Babylon, based on Bitcoin, will allow Bitcoin to enter DeFi in the form of native collateral and demonstrates how the Hub and Spoke model of Aave V4 can easily launch new markets," said Stani Kulechov, founder and CEO of Aave Labs. "By enabling native Bitcoin to be used directly as collateral in Aave—without wrapping or centralized custody—this collaboration activates an important new source of liquidity for global DeFi lending and on-chain financial activities."

This initiative further strengthens Babylon's mission—to make Bitcoin a usable and productive asset in global markets. Trustless Bitcoin staking has attracted over $60 billion in native Bitcoin participation, demonstrating a strong market demand for secure, yield-generating infrastructure. Today, the trustless Bitcoin vault extends this functionality to a $1.7 trillion market, opening a clear path for institutional capital, including lending institutions and asset management companies, to use native Bitcoin as high-quality collateral. These products collectively enhance Bitcoin's role as active liquidity in the decentralized economy.

About Babylon

Babylon Labs is dedicated to making Bitcoin a trustless productive asset, with a vision to build a decentralized world protected by Bitcoin. Its latest technological achievement is the trustless Bitcoin vault, a solution that enables native Bitcoin to be used in the DeFi ecosystem without relying on custodians, cross-chain bridges, or wrapped assets. Babylon has also launched a self-custodied Bitcoin staking protocol, which has currently activated over $10 billion in native Bitcoin to secure PoS chains, Layer 2, data availability layers, and other decentralized systems. This allows Bitcoin holders to earn staking rewards while maintaining full control.

About Aave Labs

Aave Labs is shaping the next generation of global on-chain financial systems. The team builds products trusted by individuals, businesses, and institutions, securely processing billions of dollars in transactions daily and providing 24/7 uninterrupted service. Under the leadership of Stani Kulechov, founder of ETHLend (established in 2017) and Aave protocol (launched in 2020), Aave Labs continues to drive significant upgrades to the Aave protocol, including the upcoming V4 version. Aave Labs is known for its multiple innovations, such as Aave's over-collateralized stablecoin GHO, the rapidly growing institutional platform Horizon, and the recently launched consumer-facing Aave savings application. Aave Labs is committed to creating a more open, transparent, and accessible global financial system for individuals and institutions.

About the Aave Protocol

Aave is the largest and most trusted decentralized finance (DeFi) network globally, with $60 billion in net deposits and $29 billion in active loans. It operates as a global lending and savings network, allowing users to deposit cryptocurrencies or stablecoins for yield, or to use their assets as collateral for borrowing. Aave is powered by transparent blockchain smart contracts—no bank intervention, no paper documents, 24/7 uninterrupted service—providing users worldwide with an open on-chain financial experience.

This article is from a submission and does not represent the views of BlockBeats.

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