By Neng Nana 
Under the mechanics outlined in the proposal, users would lock their native Bitcoin assets within secure vaults directly on the Bitcoin network and subsequently borrow against that collateral on the Aave lending protocol. To bridge the ecosystem gap without compromising security, a non-transferable token issued on the Ethereum blockchain would represent the underlying collateral, while the actual Bitcoin itself would remain securely stored on its native blockchain, completely eliminating the need for traditional bridging or wrapping mechanisms.
The submission of this formal proposal on a Wednesday follows an initial temp-check proposal introduced on May 25. That preliminary phase successfully cleared a community-wide vote on June 10, according to public statements and updates from Babylon Labs regarding its quarterly founders call for the second quarter.
As part of the economic framework detailed in the proposal, the Aave DAO would stand to receive the first $500,000 in qualifying annual revenue generated by the integration, providing a direct financial incentive for the lending protocol to adopt the novel collateral type.
Currently, the decentralized finance ecosystem already supports various borrowing options against tokenized iterations of Bitcoin through popular assets such as Wrapped Bitcoin and Coinbase Wrapped Bitcoin. However, these existing wrapped tokens rely fundamentally on centralized custodians or trusted third-party entities to hold the underlying Bitcoin reserves in custody, which inherently introduces various counterparty risks, single points of failure, and trust assumptions that many decentralized finance purists seek to avoid.
As of Thursday, the Babylon Labs proposal remains at the Aave Request for Comment stage, a critical preliminary phase where it is currently undergoing rigorous community feedback, public debate, and comprehensive risk analysis from risk management committees and ecosystem participants.
Should the proposal successfully achieve broader community consensus during this feedback window, it will be eligible to proceed to a subsequent three-day offchain Snapshot vote. According to Aave’s established governance rules and documentation, this offchain phase requires at least 320,000 AAVE-equivalent votes cast in favor before the initiative can officially advance to a formal onchain vote. Following that, the final onchain vote must successfully meet strict quorum thresholds and approval requirements to be implemented into the protocol.
Jia Lissa 
Layla Zulfa