# Babylon Advances Bitcoin-Backed Aave V4 Plan Into Community Review By Simon Yoon Canonical URL: https://www.tokenpost.com/news/technology/32416 Published: 2026-10-15T09:56:57.000Z Updated: 2026-10-15T09:56:57.000Z Section: Technology > The proposal keeps BTC on the Bitcoin network while using a transfer-restricted Ethereum token to represent collateral. Further community votes and security analysis remain. Babylon Labs has advanced a proposal to let Aave V4 users borrow stablecoins against Bitcoin held on its native network, opening a review that precedes further governance votes and security analysis. Aave opened the proposal for community comment and risk review in an ARFC post on Oct. 14. Users would lock Bitcoin (BTC) in vaults on the Bitcoin network and borrow through Aave. A transfer-restricted token on Ethereum would represent each collateral position while the BTC stays on Bitcoin. The design gives the two networks different roles: Bitcoin holds the collateral, while the Ethereum token represents the position used in the lending process. The proposal does not rely on BTC being wrapped or bridged to Ethereum. Aave already supports loans backed by Wrapped Bitcoin (WBTC) and Coinbase Wrapped Bitcoin (cbBTC), which rely on custodians to hold the underlying BTC. Babylon’s proposal offers a different structure by keeping the collateral on Bitcoin itself. Babylon Labs posted a Temperature Check on May 25; it passed on June 10. Babylon Labs and HashKey Cloud previously outlined a plan for [native Bitcoin borrowing through Aave](). If the current review produces community consensus, the next step would be a three-day off-chain Snapshot vote. The proposal would need at least 320,000 Aave (AAVE)-equivalent votes in favor to advance to a formal on-chain vote, which would still need to meet quorum and approval requirements. The first $500,000 of qualifying protocol-level fee revenue in each year from launch would go to Aave DAO. The allocation covers qualifying fees, rather than all borrower interest. The proposal remains subject to the community review and subsequent votes before it could move toward launch. ## Links in this article - [native Bitcoin borrowing through Aave](https://www.tokenpost.com/news/business/27644)