In a big win for BitcoinDefi, Babylon, the project building trustless BTC “vaults” and native Bitcoin staking primitives, has closed a $15 million funding push led by a16z Crypto.
a16z’s crypto arm has made a strategic investment into Babylon via a BABY token purchase. It will be providing roughly $15 million of capital to accelerate development of BTCVaults. These vaults are cryptographic primitives and infra designed to keep BTC on the Bitcoin base layer while allowing other chains and smart-contract platforms to verify and enforce collateral rules.
Babylon and a16z portray the funding as runway to bring native BTC into lending, collateral, and other on-chain financial products without custody or wrapping.
The funding comes amid growing institutional interest in making native Bitcoin usable inside DeFi as more than 99% of it sits ideal in wallets with no use. Here’s How
https://twittercom/babylonlabs_io/status/2008889587813494908
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a16z Funds Bayblon – Here’s Why
At the heart of Babylon’s approach is a simple but ambitious goal: Bitcoin should remain on Bitcoin.
Today, most on-chain Bitcoin collateral relies on wrapped assets or centralized custody, models. However, these introduce counterparty risk, regulatory complexity, and, in some jurisdictions, tax implications.
Despite Bitcoin’s growing acceptance in traditional finance -via BTC spot ETFs managing over $120 billion in assets – less than 1% of Bitcoin is currently wrapped. This leaves more than $1.4 trillion worth of BTC economically idle.
However, Babylon’s BTCVaults for which it has received funding aims to change that.
Rather than transferring BTC into another system, BTCVaults allow Bitcoin to be verifiably locked on the Bitcoin base layer. This can happen while external applications can confirm its status, enforce collateral rules, and trigger unlocks or liquidations through cryptographic enforcement. Users could retain control of their keys, and the asset is not transformed into a synthetic or wrapped version.
Thus, Babylon lets BTC stays native as the vaults provide verifiable enforceability to other systems.
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Why a Win for BitcoinDeFi
Babylon’s raise highlights a broader shift in crypto’s Bitcoin narrative. It shows how crypto players are working to change the role of the largest blockchain from passive store of value to productive, trustless collateral.
If Babylon’s approach works at scale, it solves a perennial problem: how to make Bitcoin productive. Users can lend it, use it as collateral, mint stablecoins while preserving self-custody and minimizing trust.
That could unlock new flows of BTC liquidity into on-chain credit markets, perpetuals, and cross-chain settlement. With this, Babylon can expand the definition of “Bitcoin DeFi” beyond wrapped assets to truly native use.
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