Overall Summary / Introduction
Babylon’s third Quarterly Founders Call marked a big inflection point for the project. The team shared what went well in 2025, what the community is still worried about, and why 2026 is about shipping a product with clear product market fit: Trustless Bitcoin Vaults (TBVs). Below is a clean recap of the main announcements, the roadmap, and the most important Q&A moments.
Purpose of These Calls:
David opened by stating the series's purpose: direct, honest communication with the community. That includes sharing what’s working, what’s not, and what needs feedback, without overclaiming. Babylon also hit a milestone: the project is entering its fifth year, with a long-standing mission to connect Bitcoin to the broader on-chain economy.
2025 Review: What Went Well
1) Babylon Genesis and Bitcoin Staking shipped and held up:
Fisher recapped that Babylon launched Babylon Genesis and the Bitcoin Staking Protocol in 2025, and that the system has run smoothly with no major incidents. The protocol has activated over $10B worth of native BTC through the system so far, and the staking protocol reached around 60,000 BTC in TVL (roughly $5B to $6B at the time referenced).
2) TBVs moved from concept to real mainnet proof:
In Q4, Babylon ran a mainnet experiment that used native BTC as collateral to borrow real USDC on the Ethereum mainnet. The team framed this as the first time native Bitcoin-backed borrowing was done in a trust-minimized way, without relying on a wrapped BTC custodian model.
3) Aave partnership and a16z support:
Babylon formed a formal partnership with Aave to bring native BTC collateral into Aave lending flows. The team also shared that a16z backed the Babylon Foundation, citing belief in the TBV direction.
Community Concerns We Heard Clearly
1. Sell pressure from staking rewards:
Some BTC stakers receive BABY rewards and sell, creating consistent sell pressure.
2. Unclear BABY demand beyond staking:
The community wants the token’s utility and value capture to be clearer and more directly tied to product usage.
The team’s message: 2026 is about solving these in a more fundamental way, not with cosmetic tweaks.
Babylon’s View of the 2026 Macro
Fisher laid out a simple thesis:
- Crypto is moving toward mainstream adoption, and that adoption will be finance-centric.
- Institutions and Wall Street will absorb crypto tech into the broader financial system.
- Projects that thrive will have real product market fit and real revenue. - Old playbooks fade: pure narrative projects and “L1 premium” dynamics matter less.
- The industry should shift away from zero-sum behavior and toward building real value.
Babylon’s response to this future is the TBV protocol.
The Core Problem: Why Only About 1 Percent of BTC Is Used in DeFi
The team framed the current bottleneck like this:
To use BTC in DeFi today, most users must hand BTC to a custodian or bridge that issues a wrapped representation (like a “gift card” model). That introduces counterparty risk and breaks the Bitcoin ethos of trust minimization.
TBVs aim to remove that middleman. The vision is native BTC that stays self-custodial, while still becoming usable as programmable collateral inside the smart contract economy.
The Key Technical Unlock: BABE
David explained that if you remove the middleman, cryptography must replace them. That requires proof systems that allow BTC to be redeemed trustlessly based on what happens on another chain.
The team’s breakthrough is BABE, a proof verification protocol developed with Berkeley cryptography researchers (BA = Babylon, BE = Berkeley). David shared that BABE reduces cost and overhead dramatically:
- Roughly 1000x smaller storage
- Roughly 1000x faster setup, from hours to minutes or seconds
- Practical enough for everyday users, not supercomputers
Babylon’s philosophy here is important: research is not just published; it is quickly productized.
What TBVs Unlock: A Product Ladder, Starting with Lending
Fisher outlined TBVs as “programmable Bitcoin collateral” that can plug into multiple DeFi categories:
1. Bitcoin-backed lending (first focus):
Use native BTC as collateral to borrow stablecoins and other assets.
2. Bitcoin-backed stablecoins (longer-term endgame):
A natural evolution of collateralized lending is the issuance of BTC-backed stablecoins, similar to how CDP models work in DeFi.
3. Insurance markets:
BTC and ETH as reserve assets for on-chain insurance, offering risk and yield profiles different from those of lending.
4. Perps and options:
Native BTC as collateral for derivatives, enabling strategies like selling covered calls and earning premiums.
On deployment, Babylon expects to start with mature DeFi ecosystems, beginning with Ethereum as the first major venue and lending via Aave.
First Principles: Babylon’s PMF Assumptions
1. Bitcoin stays and reaches broader adoption (retail and institutional).
2. A meaningful subset of Bitcoin holders want finance (yield, liquidity, leverage).
3. On-chain finance has unique advantages over off-chain finance that justify switching.
Babylon’s target users are Bitcoin holders who:
- Want finance exposure
- Are open to on-chain finance
- Care deeply about self-sovereignty and avoiding wrapper or counterparty risk
Is Babylon a BTC Project or a BABY Project?
Fisher’s answer: both.
- BTC side: make Bitcoin a backbone collateral asset for on-chain global finance.
- BABY side: ensure BABY captures the value created by enabling that BTCFi economy.
This is where roadmap and tokenomics meet product.
BABY Next Steps: Bridging and Tokenomics Redesign
Fisher shared two major efforts underway:
1. BABY bridging to Ethereum:
Since TBV activity and DeFi integrations happen on Ethereum and other DeFi chains, Babylon needs BABY present where value is being created. The team is evaluating bridging solutions with ecosystem partners and plans to bring a proposal to the forum.
2. Reduce inflation and repurpose emissions:
The team is working on designs to reduce inflation (and sell pressure) and shift token incentives toward TBV usage and value capture.
David emphasized a key principle: value creation comes first. Tokenomics is about capturing real value, not manufacturing it.
Q1 2026 Roadmap: Three Concrete Deliverables
Fisher’s “what to expect” list for Q1:
1. Launch the TBV lending testnet with Aave
2. Start governance discussions on BABY tokenomics upgrades
3. Share a bridging proposal for BABY, designed with ecosystem partners
Q&A Highlights
Here are the most important answers from the community segment.
- Can TBVs enable a self-custodial “Bitcoin mortgage” style loan? Yes. The core idea is turning BTC into collateral without selling it. This unlocks borrowing against BTC while keeping exposure to BTC.
- Does borrowing avoid capital gains tax? The team explicitly avoided tax advice. They pointed out that borrowing against collateral is an old financial pattern, but users should consult professionals based on their jurisdiction.
- What drives interest rates, and can they be lower than banks? For the Aave integration, rates are determined by Aave’s interest rate model plus a risk premium. Babylon’s goal is to minimize that risk premium by making the system as trust-minimized and secure as possible. Fisher and David noted that DeFi has often shown more efficient rates in aggregate, but nothing can be guaranteed for any specific bank comparison.
- A16Z valuation, vesting, deal terms? Not disclosed. The team clarified the investment was with the Babylon Foundation and framed it as long-term.
- Are you building privacy features for large BTC holders? Not yet. David said privacy is important and connected to cryptography, but it is not the current focus.
- Will there be developer infra and APIs by Q2? Fisher described a three stage launch plan:
- Alpha testnet (February): harden Bitcoin side, ZK, verification
- Beta testnet (March to April): mainnet-ready, stable APIs and documentation
- Mainnet target (May to June): lending mainnet
- Will the TBV testnet be incentivized? Yes. The team plans careful campaigns to attract the right users, both to stress test the system and to onboard target customers.
- Can staked BTC also be used for TBVs? Potentially in the future. For the initial launch, the systems are not coupled. The team mentioned a longer-term plan to migrate TVL from staking into TBVs.
- What happens if BABE disappears? David answered plainly: without BABE, there is no trustless proof verification, and the system collapses. It is foundational.
- Common user mistakes and UX expectations? Fisher highlighted two likely points of confusion:
- People may expect a “vault” to be a pooled fund, but TBVs are self custodial and per user.
- Redemption is “whole vault” rather than partial withdrawal (one piece in, one piece out).
- Cosmos dependency risk? Babylon is shifting to a chain agnostic strategy. The TBV path is insulated from Cosmos specific churn.
- How will regulators interpret TBVs? Fisher noted TBVs are segregated and self custodial with no commingling, which should be easier to reason about than pooled custody models.
- Does co-staking matter inside TBVs? No. Co-staking is part of the BTC staking evolution, and TBVs are a separate protocol line.
- Can one vault route to multiple DeFi protocols at once? No. The team does not want a single vault simultaneously exposed across multiple apps with different liquidation and trust assumptions.
Closing Thought
The call’s theme was consistent: Babylon is moving from a successful first phase (Bitcoin Staking and Genesis) into a second phase centered on TBVs as the flagship product.
The bet is simple but ambitious: make native Bitcoin programmable and productive in DeFi without wrappers, custodians, or bridges, and evolve BABY so its value capture is tied to real product usage.
If Q1 lands as planned, the TBV lending testnet with Aave will be the first major step into that new era.
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