Babylon secured $15 million in funding from a16z Crypto through a purchase of its native BABY tokens to support the expansion of its trustless Bitcoin
collateral infrastructure.
This protocol allows Bitcoin holders to use their BTC as collateral in on-chain lending systems without giving up control.
The investment was announced in a blog post published by a16z Crypto on January 7, aimed at advancing the development of Babylon’s Bitcoin-native vaults and lending tools.
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Babylon, founded in 2022 by David Tse and Fisher Yu and initially a Bitcoin staking protocol, is building a system of trustless vaults. These vaults keep BTC on the Bitcoin network while allowing users to use it as collateral on decentralized lending platforms.
A collaboration took place in December, when Babylon joined forces with Aave
Labs. They plan to launch a “Bitcoin-backed Spoke” within Aave V4, which enables BTC to serve as collateral without being wrapped or handled by third-party custodians.
Testing for this integration is expected in the first quarter of 2026, with a public product launch targeted for April 2026.
Most methods for using Bitcoin as collateral either involve custodial services or wrapped versions of BTC. Babylon’s approach avoids these drawbacks by ensuring that Bitcoin remains on its base layer and is verifiable by external systems using cryptographic proofs.
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