Babylon Labs wants Aave V4 to accept real Bitcoin as collateral without that Bitcoin ever leaving the Bitcoin blockchain. The proposal has been in Aave's governance forum since Wednesday, October 14, 2026. Nothing has been decided: this is an ARFC, the stage before the vote. Holders of Aave therefore get a concrete template for the first time showing how much the protocol would earn from Bitcoin collateral.
What Babylon has proposed for Aave V4
The proposal is titled “Onboard Native BTC as Collateral to Aave V4 via Babylon Trustless Bitcoin Vaults” and was filed by Babylon Labs. It was preceded by a temperature check, which the proposal passed. The first use case is named clearly: borrowing stablecoins against native Bitcoin.
At Aave an ARFC is not a decision but a proposal with a rationale and a blueprint. It gathers feedback from the community and the assessment of the risk service providers before any vote takes place. The sequence is set at Aave, and it appears in this proposal too: first feedback and risk analysis, then a Snapshot vote, then an AIP with the full risk parameters for the on-chain vote.
ARFC
English (US)