Babylon Labs has secured $15 million in funding from a16z crypto to enhance the development and scaling of Babylon Trustless BTCVaults. This infrastructure system is designed to enable the use of native bitcoin as collateral across various onchain financial applications, as stated in a blog post by the company on Wednesday.
The BABY token on the platform saw a 13% increase following the a16z investment.
The funds will be utilized to improve the core technology of BTCVaults and facilitate integration with external applications that depend on verifiable, non-custodial bitcoin collateral, as mentioned by the company.
a16z crypto will also lend strategic insights based on its extensive experience in blockchain infrastructure investments.
BTCVaults aim to allow bitcoin to be locked on the Bitcoin base layer while remaining verifiable to external systems. This system is designed to enable applications to confirm that BTC collateral is secure and to manage unlocking or liquidation through cryptographic methods, rather than through custodial control or wrapped forms of the cryptocurrency.
Current on-chain Bitcoin collateral solutions largely depend on custodians or wrapped BTC, necessitating users to give up control over their assets or convert the cryptocurrency into another format.
Babylon’s approach intends to keep BTC native to the Bitcoin network while allowing its use in financial applications.
The development of BTCVaults is occurring alongside a rise in institutional adoption of bitcoin as collateral. Regulators, banks, asset managers, and trading companies have increasingly acknowledged BTC’s potential in lending, derivatives, and investment products, yet a significant portion of the crypto supply remains untapped in onchain financial systems.
BTCVaults are structured to cater to various financial use cases, including borrowing, lending, and other collateralized products, without the need for custodians or asset wrapping, according to Babylon. This infrastructure is designed to be compatible with both decentralized and traditional financial systems.
The funding will further Babylon’s objective of making BTC a productive collateral while ensuring self-custody and operation on the Bitcoin base layer.
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