Aave DAO Approves Plan to Add Native Bitcoin Collateral to V4

Aave DAO approved a proposal on Nov. 9 to let users use native Bitcoin as collateral for borrowing on Aave V4 through Babylon, advancing a route to stablecoin credit that does not require wrapping BTC.

The proposal passed with 100% of votes in favor. Under the plan, Bitcoin holders would lock BTC in Babylon's Trustless Bitcoin Vaults while retaining self-custody, then borrow assets such as USDT or USDC. The structure would not require wrapping Bitcoin or transferring it across a bridge.

Proposed parameters set a 78% collateral ratio and a 0% risk premium. Initial stablecoin borrowing capacity is about $21 million, with liquidity expected to come mainly from Aave Core Hub.

Those terms would let BTC holders access lending against the native asset while it remains in a Bitcoin vault. The proposal now advances to an AIP stage, with mainnet launch targeted by the end of 2026. The initial rollout would cap participation and scale in phases.