According to HashNews, Babylon has partnered with Aave to allow Bitcoin to be used directly as collateral for lending without wrapping or centralized custody. Babylon will also expand its vault design into the DeFi insurance space, enabling Bitcoin to serve as insurance against protocol hacks. In the absence of claims, Bitcoin will earn yield in the insurance pool; in the case of a hack, it will provide liquidity for claims. Babylon and Aave will introduce a Bitcoin-backed 'branch' within Aave's 'hub-and-spoke' architecture, allowing users to deposit Bitcoin on the base chain and borrow stablecoins and other assets. The test is expected to launch in 2026, with the product set for release in April.
Babylon Collaborates with Aave to Enable BTC Staking and Lending
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