Babylon is making a bigger push to bring Bitcoin into on-chain finance, and now it has strong backing to do it.
The crypto venture firm a16z Crypto has invested $15 million in Babylon by buying its BABY tokens. The move signals confidence in Babylon’s plan to take Bitcoin beyond just holding and staking.
Babylon first launched as a Bitcoin staking platform, giving BTC holders a way to earn yield without moving their coins off the Bitcoin network. Now, the project is expanding into Bitcoin lending through what it calls Trustless BTCVaults.
The idea is simple but powerful: let Bitcoin be used as on-chain collateral without bridges, wrappers, or custodians. That means no handing BTC to third parties and no relying on synthetic versions of Bitcoin. Everything stays native and verifiable.
Babylon uses advanced cryptography to make this work, aiming to plug Bitcoin directly into DeFi while keeping its strong security model intact. a16z says this approach could be a cleaner and safer alternative to today’s wrapped BTC systems, which are mostly controlled by exchanges or multi-signature setups.
The bigger goal is unlocking Bitcoin’s unused potential. With more than $1.4 trillion worth of BTC sitting idle, Babylon wants to turn it into active capital that can be used for lending, credit, and other financial tools—without adding new risks.
Babylon was founded by Stanford professor David Tse and Fisher Yu. a16z pointed to Tse’s long history in blockchain research and his influence on many well-known crypto builders as a key reason for backing the project.
Babylon’s staking product has already shown strong demand. Earlier staking rounds pulled in over $2 billion, with participation from major players like BitGo and Kraken.
Recently, the focus has shifted toward lending. Babylon is positioning itself as core infrastructure for native Bitcoin lending, not just staking rewards.
That shift is already gaining traction. In December 2025, Aave announced plans to use native Bitcoin as collateral on Aave V4. The integration would allow users to borrow and lend against BTC without wrapping it into Ethereum-based tokens. The first Bitcoin-backed setup is expected to launch around April 2026.
Looking ahead, a16z believes native Bitcoin could eventually support much more—things like perpetual futures, stablecoins, and other financial tools—if trustless designs like Babylon’s gain wider adoption.
In short, Babylon is betting that Bitcoin doesn’t have to stay idle anymore—and a16z is betting right alongside it.
