Babylon Launches Trustless Bitcoin Vaults, Opening New BTC Avenues in DeFi and Staking

Jakarta, Pintu News – Babylon Labs officially introduced trustless Bitcoin vaults on August 6, 2025, an innovation that allows Bitcoin (BTC) to be used in the decentralized finance (DeFi) ecosystem without the need for a bridge or custodian.

This feature opens up new potential for BTC to play a bigger role in the crypto world, while complementing the Bitcoin staking ecosystem that Babylon has already developed.

Check out the full information below!

Bitcoin is DeFi Without Leaving the Original Blockchain

Through an announcement on the official X account, Babylon explained that trustless vaults allow native BTC to be utilized in various DeFi applications such as loans, stablecoin issuance, and perpetual futures, without the need for wrapping, bridging, or relying on third parties.

The technology works by locking UTXO Bitcoin under predefined cryptographic rules. To unlock BTC, users must submit a zero-knowledge proof (ZKP) that proves the logic of the smart contract without divulging personal data. Babylon utilizes BitVM3 – Bitcoin’s native proof verification framework that combines ZKP and garbled circuits – to ensure BTC remains on the Bitcoin network throughout the process.

This design allows the execution of DeFi logic such as asset liquidation and redemption in a trustless manner. This means that Bitcoin can serve as collateral on other networks such as Ethereum (ETH), Cosmos Hub (ATOM), and other PoS blockchains without moving off the original chain.

Read also: Orca DAO Sets Up Solana Staking Strategy and 24-Month ORCA Token Buyback

BTCFi Use Cases and Economic Potential

With trustless vaults, various DeFi scenarios are possible. For example, a user could borrow IDR815.5 million ($50,000) worth of Ethereum stablecoins by locking BTC in a vault. If the BTC value drops, the liquidating party can claim the collateral by sending a valid ZKP.

Potential uses include loans, stablecoin issuance, collateral for decentralized derivatives exchanges, and liquid staking – all done with BTC that remains in the owner’s full control(self-custody).

According to Babylon, DeFi currently utilizes less than 1% of Bitcoin’s total market capitalization, which reached approximately IDR 29,416 trillion ($1.8 trillion) as of August 2025. With this solution, such large capital can be enabled to generate yield and benefit the broader cryptocurrency ecosystem.

Also read: Parataxis and SilverBox SPAC Launch $640 Million Bitcoin Treasury Company

Linkage to Babylon Staking Ecosystem

These trustless vaults are directly linked to Babylon’s Bitcoin staking protocol, which has a locked value of Rp81.55 trillion ($5 billion) and was launched on the mainnet in August 2024. Through this integration, Bitcoin can serve a dual purpose – as collateral in DeFi as well as a source of revenue from staking, including BABY token rewards.

Babylon positions Bitcoin as a core asset for securing proof-of-stake (PoS) networks, reinforcing their vision of building an infrastructure that combines BTC security with cross-chain DeFi potential. On the roadmap ahead, Babylon plans to deliver multi-staking support, EVM integration, and a cross-chain Bitcoin liquidity layer by the first quarter of 2026.

Conclusion

Babylon’s move to launch trustless Bitcoin vaults is an important milestone in the evolution of BTCFi (Bitcoin Finance). By enabling real BTC to be used in DeFi without leaving the Bitcoin network, Babylon opens up new opportunities for crypto players to utilize the immense value of Bitcoin in a safe, transparent, and productive manner.

If successfully adopted widely, this innovation could be a major catalyst in driving Bitcoin’s integration into the global decentralized economy.

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Reference:

• Babylon unveils trustless BTC vaults for DeFi and staking. Accessed August 8, 2025.
• Featured Image: Trust Machines