Babylon has partnered with Aave Labs to introduce native Bitcoin support on Aave V4 lending services.

Article Source: Babylon

The leading Bitcoin infrastructure protocol Babylon's team, Babylon Labs, today announced a strategic partnership with Aave Labs to build a Spoke supported by native Bitcoin on Aave V4, the next-generation lending architecture developed by Aave Labs. The architecture follows a Hub and Spoke model designed to support markets built for specific use cases.

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

Bitcoin-based lending has evolved into a market worth billions of dollars. Just this year, major platforms have issued over $1 billion in Bitcoin-backed loans, with industry forecasts predicting that as institutional participation increases, the total size of the Bitcoin lending market will expand to hundreds of billions of dollars. Despite rapid growth, most Bitcoin lending currently relies on centralized custody institutions and wrapped assets. Native, trustless Bitcoin collateral has long been challenging to achieve—until today. Wrapped Bitcoin and centralized custody introduce additional counterparty risk and operational complexity, 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 a trustless lending path for Bitcoin holders while maintaining Bitcoin's native security model. Aave Labs will offer architecture guidance, risk assessment, and access process design collaboration during the development process.

The two parties plan to launch the product together in April 2026, with the exact timing subject to 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 being disclosed to the community as the project progresses.

"A trustless Bitcoin Treasury enables 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 impactful use case for this technology, bringing native Bitcoin liquidity into one of the most mature lending markets in the ecosystem. This collaboration reflects the shared belief of both parties that Bitcoin can play a more significant role in DeFi through secure and scalable infrastructure. This advancement positions Bitcoin not only as a store of value but also as a productive part of the global settlement system, taking a key step forward."

「Built by Babylon, the Bitcoin-based Aave V4 market will allow Bitcoin to enter DeFi as native collateral, showcasing how through Aave V4's Hub and Spoke model, new markets can be easily launched,」 said Aave Labs Founder and CEO Stani Kulechov. 「By enabling native Bitcoin to be used directly as collateral on Aave—without wrapping or central custody—this collaboration has unlocked a significant new liquidity source for global DeFi borrowing and on-chain financial activities.」

This move further consolidates Babylon's mission—to make Bitcoin a usable and productive asset in the global market. Trustless Bitcoin collateralization has attracted over $60 billion worth of native Bitcoin participation, demonstrating a strong market demand for secure, yield-generating infrastructure. Now, trustless Bitcoin custody extends this capability to a $1.7 trillion market, providing a clear path for institutional capital, including lending institutions and asset management firms, 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 committed to enabling Bitcoin as a trustless productive asset, with the vision of building a decentralized world secured by Bitcoin. Its latest technological achievement is the trustless Bitcoin vault, which allows 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-custody Bitcoin staking protocol, currently securing over $10 billion worth of native Bitcoin to protect PoS chains, Layer 2 solutions, data availability layers, and other decentralized systems. This enables Bitcoin holders to earn staking rewards while maintaining full control.

About Aave Labs

Aave Labs is shaping the next generation of the global on-chain financial system. The team builds products trusted by individuals, businesses, and institutions, securely processing billions of dollars in daily transactions and providing 24/7 uninterrupted service. Led by Stani Kulechov, the founder of ETHLend (founded in 2017) and the Aave protocol (launched in 2020), Aave Labs continues to drive significant upgrades to the Aave protocol, including the upcoming V4 release. Aave Labs is renowned for its multiple innovations, such as Aave's overcollateralized stablecoin GHO, the rapidly growing institutional platform Horizon, and the recently launched Aave Savings application aimed at consumers. Aave Labs is dedicated to creating a more open, transparent, and accessible global financial system for individuals and institutions.

About the Aave Protocol

Aave is the world's largest and most trusted decentralized finance (DeFi) network, with $600 billion in net deposits and $290 billion in active loans. It operates as a global lending and savings network, where users can deposit cryptocurrency or stablecoins to earn interest, and also borrow against their assets instantly. Aave is powered by transparent blockchain smart contracts—no banks involved, no paper forms needed, 24/7 continuous service—providing a borderless, open-source financial experience to users worldwide.