Aave V4 plans to integrate Babylon to enable native BTC lending, eliminating the reliance on wrapped tokens

ChainCatcher reports, the Aave DAO has initiated a governance proposal to establish a dedicated Bitcoin Spoke powered by the Babylon protocol within Aave V4, enabling users to use native BTC as collateral for lending without relying on wrapped BTC or centralized custody solutions.

This proposal has been published in the Aave governance forum, seeking DAO approval to advance integration and include Babylon native BTC as collateral in the V4 lending protocol. The proposal points out that Bitcoin is the largest crypto collateral base, but currently most on-chain BTC lending depends on wrapped BTC variants, custodial intermediaries, or fragmented BTCfi platforms. The Aave V4 architecture will leverage Babylon’s staking and validation infrastructure, providing a more direct native Bitcoin lending mechanism and integrating fragmented Bitcoin collateral lending into a unified protocol.