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a16z Babylon Investment highlights $15M backing to unlock trustless Bitcoin vaults, enabling BTC collateral for DeFi without custody risks.
Author: Kritika Gupta
Published On: Thu, 08 Jan 2026 14:47:16 GMT
8th January 2026: The a16z Babylon Investment marks a $15 million backing to accelerate the development of Trustless Bitcoin Vaults. Accordingly, protocol allows native Bitcoin to stay on its base layer while serving as on-chain collateral, without custodians or wrapped assets. As a result, trillions in idle BTC could enter lending, stablecoins, and DeFi without sacrificing self-custody. The move also signals growing institutional confidence in Bitcoin as global collateral.
a16z crypto purchased $15 million worth of BABY tokens to fund Babylon’s expansion. The capital will support core development, security audits, and ecosystem integrations.
Instead of moving BTC across chains, Babylon uses cryptographic verification to prove that Bitcoin is locked. Accordingly, external applications can enforce conditions such as liquidation without ever touching the underlying asset.
This structure meets institutional standards for transparency and risk control. At the same time, it removes the trust assumptions common in custodial and bridge-based models.
Trustless Bitcoin Vaults let users lock BTC directly on the Bitcoin blockchain. Additionally , advanced cryptography then allows other chains or applications to verify that lock.
Notably, the Bitcoin never leaves its base layer. Users keep full control of their private keys at all times. As a result, the design removes counterparty risk while preserving Bitcoin’s self-sovereign foundation.
At the same time, it enables composability without compromising security.
Today, Bitcoin’s market capitalization exceeds $1.8 trillion. However, most BTC remains idle. Currently, less than one percent enters DeFi through wrapped or custodial solutions. In practice, wrapped BTC adds regulatory friction and rehypothecation risk. Meanwhile, custodial lending forces users to surrender key ownership.
By contrast, Trustless Bitcoin Vaults offer a cleaner alternative. They enable native BTC to back loans, stablecoins, insurance products, and structured derivatives.Â
At the same time, institutional adoption reinforces this shift. Increasingly, ETFs, regulators, and banks treat Bitcoin as pristine collateral.
Next, Babylon plans to expand integrations across major DeFi protocols. Already, a Bitcoin-backed lending spoke for Aave V4 is in testing. At the same time, the BABY token will take on a larger role in governance and ecosystem coordination.Â
Ultimately, long-term value capture will depend on real adoption and sustained protocol usage. As demand increases, Trustless Bitcoin Vaults could activate vast pools of dormant BTC.Â
In turn, this shift would transform Bitcoin from a passive store of value into productive financial capitalwithout sacrificing trustlessness.
Real voices. Real reactions.
🔔 @babylonlabs_io raises $15M in Strategic round Babylon is pioneering Trustless Bitcoin Vaults (BTCVaults), enabling native BTC to be locked and used as collateral without wrapping, custodians, or intermediaries. This innovation preserves Bitcoin’s trustless nature while https://t.co/vR8bvrlXnu
🔥 NEW: a16z crypto is backing the Babylon Project with $15M to develop and scale its Trustless Bitcoin Vaults, expanding functional utility for the BABY token. https://t.co/9Bk0rVMK2f
đź’° @Babylonlabs_io secured $15M from @a16zcrypto #Babylon secured $15M investment from #a16zcrypto to support the development and scaling of Babylon Trustless Bitcoin Vaults #BTCVaults, a new infrastructure that enables native #Bitcoin to serve as collateral across on-chain https://t.co/s8ZaGx7ora
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