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By David Tse
Today, we are pleased to share that a16z crypto is backing Babylon in order 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 financial systems. Beyond the $15 million investment, we are excited to be able to lean on the firm for its strategic guidance, and deep experience backing foundational technologies.
A16z crypto has a long history of supporting category-defining infrastructure. Their involvement reflects a shared conviction that Bitcoin is becoming a pristine global collateral asset, and a key step is building trustless infrastructure to enable Bitcoin to function productively without compromising its foundational properties.
The CFTC recently expanded its list of acceptable derivatives collateral to include Bitcoin, signaling a broader institutional shift toward its use in financial transactions. Major banks and trading firms already offer Bitcoin-backed credit products, while large treasuries and asset managers increasingly treat Bitcoin as part of long-term capital strategy. At the same time, consumer infrastructure continues to evolve, with MetaMask recently enabling native Bitcoin support. U.S. spot Bitcoin ETFs now manage more than 120 billion dollars in assets, according to Bloomberg Intelligence, further reinforcing this trend.
Despite this momentum, the underlying infrastructure for using native Bitcoin as collateral remains constrained. Today, most on-chain solutions rely on custodial lending or wrapped representations of Bitcoin. These models function, but they introduce limitations that become more significant as adoption deepens. Less than 1% of the Bitcoin asset is wrapped, while more than 1.4 trillion dollars of Bitcoin sits idle today, unable to be used as native collateral without giving up custody or transforming the asset into a wrapped version.
Custodial approaches require users to relinquish their Bitcoin entirely. Wrapped Bitcoin transfers the asset into another system and, in many jurisdictions, may be treated as both a disposition of the original asset and an acquisition of a new one. This can create tax, compliance, and operational considerations that many institutions and long-term holders seek to avoid.
Babylon is building a different path.
Babylon is creating Babylon Trustless BTCVaults, which allow native Bitcoin to be verifiably locked and used as collateral without wrapping, custodians, or intermediaries. A BTCVault is anchored on the Bitcoin base layer and enables external applications to confirm that the Bitcoin remains in place, enforce collateralization conditions, and execute unlock or liquidation rules through cryptographic mechanisms rather than discretionary control. The underlying technology uses witness encryption and garbled circuits to enable Bitcoin to efficiently verify zero-knowledge proofs.
The Bitcoin stays on Bitcoin.
Users maintain control of their keys.
The asset is not transformed into anything else.
BTCVaults preserve the defining trustlessness property of Bitcoin while making it usable in both decentralized and traditional financial systems.
BTCVaults broaden what is possible with native Bitcoin. They make borrowing, lending, stablecoins, insurance, credit issuance, and structured products possible without requiring the asset to be wrapped or rehypothecated. Traditional markets already demonstrate demand for these products, evidenced by banks offering Bitcoin-backed loans today. Babylon enables similar activity while maintaining the integrity and native format of Bitcoin.
For institutions, BTCVaults reduce counterparty exposure, operational complexity, and regulatory ambiguity around asset transformation. For users, they provide financial utility while preserving the characteristics that make Bitcoin valuable in the first place.
In parallel, Babylon BTCVaults introduces new surfaces for the utility of the BABY token. As applications, vault providers, and integrations develop around BTCVaults, the role of BABY within the ecosystem will expand to support coordination, participation, and future value capture mechanisms. The economic design is still being actively developed, but BTCVaults create the foundation for BABY to play a meaningful role across a growing suite of native Bitcoin financial products.
As Bitcoin gains adoption across global finance, the infrastructure that supports it must evolve toward trustless verifiable mechanisms that scale with institutional expectations. A16z crypto’s involvement strengthens our focus on delivering the BTCVault infrastructure required for Bitcoin to play that role.
Our mission is to enable Bitcoin to serve as productive, programmable, native collateral without compromising its core principles. This is not about replacing existing systems; it is about expanding what is possible and offering a trustless alternative that aligns with Bitcoin’s ethos and the needs of modern financial markets.
We are building toward a future where Bitcoin can support financial applications at global scale while remaining exactly what it has always been: a self-custodied asset rooted in its base chain. This next chapter for Bitcoin begins with BTCVaults, and we are focused on delivering the infrastructure that makes it possible. We are excited to have the support of a16z crypto to achieve this goal.
