Aave DAO has posted a Snapshot proposal to add native bitcoin collateral to V4 through Babylon's Trustless Bitcoin Vaults, with voting scheduled to begin Nov. 6. The integration would let users borrow stablecoins while their BTC stays locked on Bitcoin.
The proposal, titled '[ARFC] Onboard Native BTC as Collateral to Aave V4 via Babylon Trustless Bitcoin Vaults,' runs from Nov. 6 at 9:03 a.m. ET to Nov. 9 at 9:03 a.m. ET. Voters can choose For, Against or Abstain. At 11:59 a.m. ET on Nov. 5, Snapshot listed it as pending, with zero votes and no voting power recorded.
Aave's governance rules specify a 320,000 AAVE voting-power threshold for the Snapshot stage. The ARFC vote makes a binding governance commitment, but does not itself execute the market's activation.
The move advances the discussion-stage plan published Oct. 14. Under Babylon's design, BTC would remain in vaults on Bitcoin rather than be deposited with a custodian to issue a tradable wrapper. Aave would recognize the collateral through a transfer-restricted ERC-20 token used only for internal accounting.
The integration would add two modules, or Spokes. The Babylon Spoke would accept native BTC as its only collateral and draw loan assets from an Aave V4 liquidity Hub. The BTC Vault Swap Spoke would handle liquidation settlement.
That second module addresses a timing mismatch: native BTC redemption takes several days and is restricted to participants named in advance in each vault. Other liquidators could instead receive WBTC immediately, borrowed from the Hub against seized vaults. Approved arbitrageurs would later buy those vaults, repay the WBTC debt and redeem the bitcoin.
Risk Settings Take Shape
LlamaRisk, Aave's risk service provider, published recommendations on Oct. 23, including a 300 BTC collateral cap and a 78% collateral factor. It also recommended Chainlink's BTC/USD SVR feed to price the native collateral. These are proposed settings, not an activated market configuration.
Proposed Initial Native-BTC Risk Settings
| Subject | Metric | Value | Period / as of | Source |
| Native BTC collateral | Proposed collateral factor | 78% | 2026-11-05 | data_source (governance.aave.com) |
| Native BTC collateral | Proposed maximum liquidation bonus | 5.55% | 2026-11-05 | data_source (governance.aave.com) |
| Native BTC collateral | Proposed add cap | 300 btc | 2026-11-05 | data_source (governance.aave.com) |
| BTC Vault Swap Spoke | Proposed WBTC draw cap from Core Hub | 100 wbtc | 2026-11-05 | data_source (governance.aave.com) |
Source: LlamaRisk recommendations published Oct. 23, 2026. Subject to governance approval.
Access would initially be limited. LlamaRisk's assessment says deposits would start with an approved group of institutional and partner users, with public access planned later.
Babylon's stated next step after a positive Snapshot result is an Aave Improvement Proposal containing full risk parameters for onchain governance approval. That separate approval and execution would still be required before the market could activate.