October 18, 2026

Aave Advances Native Bitcoin Collateral Plan

Aave Advances Native Bitcoin Collateral Plan

Babylon Labs proposes allowing Bitcoin as collateral on Aave V4 without wrapped tokens or custodians.

For now, the proposal remains a work in progress, with the Aave Request for Comment serving as a governance stage rather than an active product. The community's support and the resolution of technical and risk-related issues will determine the next steps. This development signals a growing interest in bridging Bitcoin's infrastructure with decentralized lending platforms, though the path to full implementation is still under active discussion.

Impact
The proposal could enhance Bitcoin's utility in DeFi by enabling direct collateralization without wrapped tokens, but its success depends on governance approval and risk mitigation.