The proposal would permit liquidators to receive $WBTC immediately instead of waiting several days for native bitcoin redemption. Risk parameters for the new system will be established by Aave's risk service providers, and the implementation remains subject to governance review and approval.
Tuesday, October 20, 2026
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Babylon Labs Proposes Aave V4 Bitcoin Collateral to End Wrapping
Crypto6 days ago
A new system for utilizing native bitcoin as a loan guarantee was submitted to the Aave governance forum by Babylon Labs. The proposal for Aave V4 would allow users to lock BTC on the Bitcoin chain self-custodially through Trustless Bitcoin Vaults to borrow assets without using wrapping, bridging, or tri-party escrow. The plan introduces the Babylon Spoke and BTCVault Swap Spoke to handle borrowing and liquidation settlement, while revenue sharing terms would include buybacks of AAVE and BABY tokens.
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