Babylon unveils trustless BTC vaults for DeFi and staking
Babylon Labs has introduced a breakthrough in decentralized finance with the launch of trustless Bitcoin vaults.
- Babylon launched trustless Bitcoin vaults on Aug. 6, enabling native BTC to interact with DeFi without bridges or custodians.
- Vaults use BitVM3 and zero-knowledge proofs to enforce smart contract logic while BTC remains on-chain.
- The feature expands BTC’s role in DeFi and complements Babylon’s Bitcoin staking ecosystem.
Announced via an Aug. 6 post on X, these vaults allow native Bitcoin ( BTC ) to be used in decentralized finance applications, such as lending, stablecoin minting, and perpetual futures, without wrapping, bridging, or relying on custodians.
Bitcoin in DeFi without leaving Bitcoin
The vaults function by locking Bitcoin UTXOs under preset cryptographic rules. To unlock BTC, users must submit zero-knowledge proofs that validate smart contract logic without exposing private data. Babylon leverages BitVM3, a Bitcoin-native proof verification framework using ZKPs and garbled circuits, to ensure BTC never leaves the Bitcoin blockchain.
This design enforces DeFi logic, including liquidations and redemptions, without the need for intermediaries, allowing native Bitcoin to function as collateral on Ethereum ( ETH ), Cosmos ( ATOM ), and other chains.
A borrower might, for example, receive $50,000 in Ethereum stablecoins and lock Bitcoin in a vault. A liquidator can claim the collateral by submitting a legitimate ZKP in the event that the value of Bitcoin declines.
Use cases for the vaults include lending, stablecoin issuance, perpetual decentralized exchange collateral, and liquid staking, all while BTC remains self-custodied.
Powering BTCFi and expanding Babylon’s vision
The trustless vaults are part of Babylon’s broader push to integrate Bitcoin into decentralized economies. DeFi uses less than 1% of the roughly $1.8 trillion market capitalization of Bitcoin as of August 2025. Babylon’s solution, which supports native yield generation and aligns with Bitcoin’s philosophy, can unlock this capital.
Additionally, the vaults are connected to Babylon’s $5 billion Bitcoin staking protocol, which went live on mainnet in Aug. 2024. Babylon positions Bitcoin as a core asset for securing proof-of-stake networks by fusing vault functionality with staking rewards, such as BABY tokens.
Future developments in Babylon’s roadmap include multi-staking support, EVM integration, and a cross-chain Bitcoin liquidity layer expected in Q1 2026.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The Federal Reserve shifts its policy, ushering in a new era of global asset revaluation
Is "VC is dead" a reality or just sentiment? How do industry insiders view this downturn?
Ethereum’s Holesky Testnet Enters Its Final Phase
Quick Take Summary is AI generated, newsroom reviewed. Holesky testnet shutdown begins this week, with operators deactivating nodes over ten days. Ethereum Foundation cites completion of Fusaka testing and technical evolution as reasons for closure. Validators should migrate to Hoodi, while developers move to Sepolia for application testing. The shift marks Ethereum’s new modular testnet era, ensuring faster, cleaner, and scalable testing environments.References 🚨 UPDATE: Ethereum Foundation announces Hol
Interview with Bit Digital CEO Sam Tabar: We Sold All Our Bitcoin and Switched Entirely to Ethereum
A monologue from an ETH Maxi.
