Interesting

Bitcoin is up to something again. Recently, a team called Babylon Labs received a $15 million investment from a16z, and they are pondering a question—can native BTC be used directly on-chain as collateral, completely bypassing custodial and wrapped tokens?

You might not fully understand what this means yet. Currently, if you want to borrow in DeFi using Bitcoin, you usually have to convert it into wrapped tokens like WBTC first, and then use that as collateral. What's the problem? Platform risk, slippage losses, custodial credit risk—all of these are bets you have to make. Babylon's idea is straightforward: why not allow "pure Bitcoin" to automatically execute collateral logic on Layer 1? Eliminating middlemen, which could theoretically maximize security.

This scheme sounds indeed tempting. Veteran crypto players know that cross-chain interactions are most feared for smart contract vulnerabilities and bridge risks. Cases of bridge attacks from previous years are still fresh in memory. But if Babylon can truly enable Bitcoin to "transform on the spot" into a collateral tool, at least in terms of theoretical security, it could surpass WBTC by a large margin.

But don’t get carried away by the concept. The risk list isn’t short: first, the technical implementation itself is a trap—vulnerabilities in cross-chain protocols are never minor issues; second, the track is already crowded—DeFi giants like Compound and Aave have been in this space for years, and how new projects can break through is uncertain; third, protocol fees—BTC believers value non-custodial features, but if the protocol fees are too high, the final returns could be eaten up and not worth it.

A16z’s investment definitely injects a shot of confidence into the industry, but before investing, ask yourself: is this truly a "purer Bitcoin faith," or just another round of concept packaging? The answer might be more important than the numbers themselves.