AAVE voters have just claimed original Bitcoin collateral -. No wrapping or BTC bridging.
One of the biggest DeFi lending protocols is getting closer to actually accepting Bitcoin as collateral.
AAVE V4 will soon be able to support BTC NATIVE.
On November 9th, Aave's administration agreed in a Snapshot vote to incorporate into the TRUSTLESS BITCOIN VAULTS balloons.
The result?
100% of the votes received were in favor.
The proposal received approximately 356,881 votes in favor of the merger, with no votes against or abstentions.
And the technology behind it is particularly interesting.
Today, Bitcoin holders who want to borrow against BTC in Ethereum DeFi often need a wrapped representation like WBTC or cbBTC.
These systems introduce additional assumptions of custody, mediation or trust.
Babylon wants to offer a different approach.
Instead of transferring BTC to Ethereum, users would lock their real Bitcoin directly on the Bitcoin network inside the programmable Taproot vault.
Ethereum smart contracts can then identify these collaterals using cryptographic proofs.
Users can borrow stablecoins like USDC and USDT through Aave V4 while their underlying BTC remains secured by native Bitcoin transaction rules.
No wrapped BTC is required for the initial collateral deposit.
There is no traditional bridge.
There is no third party custodian that holds the deposited bitcoins.
But there is another important element.
The integration introduces a special decomposition mechanism that allows unhealthy situations to be resolved even though their underlying securities exist in another blockchain.
A balloon system uses cryptographic proofs and a challenge process to coordinate these actions.
The proposal also establishes a revenue sharing arrangement.
The first $500,000 in annual eligible protocol revenue will be fully transferred to Aave DAO.
Beyond this threshold, revenue will be split between Aave, Babel and allocated to AAVE and BABY token purchases.