DeFi & NFT
By Maheen Hernandez
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Babylon Labs Targets Aave V4. The targeted version is Aave V4 — not the still-dominant V3, but the next generation of the…
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What This Means for Bitcoin Holders. If successful, the implications for BTC holders would be tangible.
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Babylon Labs has submitted a proposal to Aave. The idea: use native Bitcoin as direct collateral on the protocol, bypassing wrapped tokens or bridges.
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No wBTC. No intermediaries. Just raw BTC.
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This represents a significant shift in DeFi logic. Currently, a Bitcoin holder wanting to borrow on a decentralized platform must first convert their BTC into something else — a…
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And this is where it gets interesting — or complicated, depending on your perspective.
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Bitcoin is not designed to interact directly with Ethereum smart contracts. It's a different network, a different logic.
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What we do know is that the first step is a community sentiment vote. Aave operates through decentralized governance — AAVE token holders vote on changes.
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Read also: XRP Stuck Near $1.36 While Bitcoin Holds 58% Market Dominance
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If successful, the implications for BTC holders would be tangible. Currently, borrowing USDC or ETH by using Bitcoin as collateral requires prior conversion.
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This is a strong argument to attract a user base that has so far stayed away from Ethereum DeFi precisely because they refuse to alter their bitcoins or bridge them.
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And the potential market is huge. Bitcoin still represents the largest market capitalization in the crypto sector. Only a fraction of this liquidity is currently mobilized in DeFi.
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But the road is long. First, the sentiment vote. Then technical discussions. Then tests. Then potential deployment — the word "potential" is crucial here. Nothing is guaranteed.
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The Aave community has previously rejected or delayed similar proposals when technical risks were not adequately addressed.
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Read also: Strategy Saves $120 Million Buying Back Bonds While Bitcoin Remains Untouched
The Currency Analytics
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