Babylon secures $5B in staked Bitcoin, partners with Aave for BTC lending
Bitcoin has always been the asset everyone wants to hold but nobody wants to use. Babylon is trying to change that, and the numbers suggest it’s working.
The Bitcoin staking protocol has crossed $5 billion in total value locked, representing roughly 56,853 BTC committed to its system. At its peak, TVL exceeded $6 billion. Now, through a new partnership with Aave, Babylon is making that locked Bitcoin productive in ways that didn’t exist a year ago.
How the Aave integration actually works
Babylon’s approach uses what it calls Trustless Bitcoin Vaults, or TBVs, to let users stake their BTC natively on Bitcoin’s own network. The staked Bitcoin helps secure Proof-of-Stake chains, and users retain full custody throughout the process.
The Aave partnership, announced in December 2025, extends this concept into lending. Through TBV “spokes,” native BTC can now serve as collateral in Aave’s lending markets. You can borrow stablecoins against your locked Bitcoin without wrapping it, bridging it, or giving up your keys. When you repay the loan, your collateral unlocks.
Aave is the largest decentralized lending protocol in crypto, and plugging native BTC into its markets creates a borrowing channel that didn’t previously exist at this scale.
The valuation gap that has people paying attention
Babylon’s BABY token launched in April 2025 with a total supply of approximately 10 billion tokens. Its current market cap sits in the range of $52 million to $55 million.
Compare that to the $5 billion-plus in Bitcoin staked on the platform. The ratio of TVL to token market cap is unusual. Most DeFi protocols with billions in TVL carry token valuations in the hundreds of millions or billions. Babylon’s token is trading at roughly 1% of its TVL.
The project raised $70 million in a funding round at an $800 million valuation before the BABY token went live. Backers include a16z. That pre-launch valuation was about 15 times higher than where the token market cap currently sits.
What Babylon means for the broader BTCFi landscape
Bitcoin doesn’t have a native staking mechanism the way Ethereum does. Babylon built a system where BTC holders can delegate their coins to help secure other chains, earning yield in the process, without moving their Bitcoin off its native network.
The Genesis chain and staking system launched earlier in 2025. Since then, the protocol has accumulated its multi-billion-dollar TVL.
The Aave integration extends this further. A Bitcoin holder can now stake BTC on Babylon, help secure PoS networks, and simultaneously borrow stablecoins against that position. That’s two layers of utility from a single asset. The BTC never leaves Bitcoin’s chain, and no custodian ever touches it.
What this means for investors
The risk profile deserves scrutiny. Trustless Bitcoin Vaults are a novel cryptographic construct. Smart contract risk in the TBV spoke connections to Aave is a factor. And while Babylon emphasizes that users retain custody, the economic security of the staking mechanism itself depends on slashing conditions and validator behavior across the PoS chains being secured.
Token economics and governance power matter here, as does whether BABY accrues fees, voting rights, or some other tangible claim on the protocol’s activity.
Wrapped BTC products like cbBTC and tBTC continue to grow, and other Bitcoin Layer 2 solutions are pursuing similar DeFi integration goals. Babylon’s advantage is its custodial model, where BTC stays on Bitcoin’s chain.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
AI boom reshapes the wafer foundry landscape! UBS: Explosive demand accelerates advanced process expansion, mature process enters upward cycle
UBS stated in a recent research report that within the foundry market, the Total Addressable Market (TAM) for the N2 (2nm) node far exceeds expectations, A14 (1.4nm) production expansion is accelerating, and the upcycle for mature process nodes has already begun.
$1,999 Foldable iPhone Is Ready, but Apple (AAPL.US) Faces Over $5.7 Billion Patent Penalty
As Apple intensifies its efforts in foldable displays and AI business, it faces a haptic technology patent compensation ruling exceeding $5.7 billion. On September 25, a federal jury in California found that Apple's Taptic Engine, used in certain iPhone and Apple Watch models, infringed on two patents held by Taction Technology.
Prospects for the opening of the Hormuz Strait are overshadowed, Asian bonds under pressure: 2Y Japanese bond yield approaches 2%, 3Y Korean bond yield rises to highest level since 2022
With high oil prices, short-term bond yields in South Korea and Japan have risen.
5% US Treasury pressure weighs on global assets, while Australian government bonds open up a window for allocation? Fixed income giant Pimco calls the rate hike expectations too aggressive
Pacific Investment Management Company (Pimco) holds a constructive view on Australian bonds, believing that market expectations for rate hikes are too high. Pimco stated that the rate hike cycle in Australia has been "fully priced in," and cracks are beginning to appear in the economy, making Australian bonds look attractive, especially in the 5- to 10-year segment of the yield curve.
Crypto prices
More
