Aave DAO Votes Unanimously to Take Native Bitcoin as Collateral on V4

Aave DAO didn't hedge. The vote to accept native Bitcoin as collateral on Aave V4 passed on Nov. 9 with 100% of votes in favor, routed through Babylon's Trustless Bitcoin Vaults, according to Babylon. The proposal still needs a final Aave Improvement Proposal to go live on Ethereum mainnet.

The setup skips the usual workarounds: holders lock BTC in self-custodial vaults and borrow USDT, USDC and other supported assets with no wrapping, bridging or tri-party agreement, Babylon said. Borrowing runs through a new Babylon Spoke on Aave V4, while a BTCVault Swap Spoke handles settlement. Native Bitcoin carries a 78% collateral factor and a 0% risk premium, which Babylon says translates to no extra borrowing interest. Holders keep title to their coins.

The fuel comes mostly from Aave's Core Hub, which opens with $21 million in credit lines spread across USDT, USDC, GHO, USDG, RLUSD and WBTC, with Babylon saying that figure will climb progressively. Aave founder Stani Kulechov backed the idea early, writing during the Temp Check that it was a 'strong start by enabling real Bitcoin as collateral on Aave,' per Babylon.

The money split is tiered. Aave DAO keeps the first $500,000 of integration revenue in each 12-month period after launch, then shares the rest with Babylon. The cut starts at 78% Aave, 18% Babylon and 4% for a buyback fund on annual revenue between $500,000 and $2 million, and slides to 61.5%, 31.5% and 7% above $6 million. The buyback fund itself is 85% AAVE buybacks and 15% BABY buybacks.

Babylon says six security firms ran multiple audit rounds on the integration, with four Aave DAO teams reviewing it as well. AAVE traded at $123.18, down 0.4% over 24 hours and 5.6% over the past seven days, per CoinMarketCap data.