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Babylon Q2 2026 Quarterly Founders Call TBV Progress, Mainnet Launch with Aave v4 Readiness, and Community Q&A Overall Summary This Quarterly Founders Call focused on one clear theme: Trustless Bitcoin Vaults (TBV) are moving from research and testnet to product readiness. @dntse and @baby_fisherman walked through the current state of TBV, the Aave v4 integration, why Aave on Ethereum as the first integration, testnet learnings, wallet and infrastructure partner readiness, BABY token direction, and the team’s current mainnet target. The call was also a continuation of Babylon’s broader message for 2026: build real products for native Bitcoin holders, validate them with real users, and bring native Bitcoin into DeFi without asking users to wrap, bridge, or rely on intermediaries for their Bitcoin. Below is the recap. Project Overview David opened the call by reintroducing Babylon’s core mission: giving Bitcoin holders more ways to use their Bitcoin and contributing to the broader crypto economy. Babylon’s first product was Bitcoin Staking. David pointed to Bitcoin Staking as proof that Bitcoin holders are willing to use native, trustless infrastructure when the product is useful enough. The next product now is Trustless Bitcoin Vaults (TBV). The idea behind this product is to enable native Bitcoin to be used as collateral and staying self-custodial, without relying on any third party. The Core Problem: Bitcoin Usability in DeFi David framed the opportunity of TBV around a basic market reality. Many Bitcoin holders want liquidity, yield, or access to financial products, but the current options if they want to borrow in DeFi are: Transfer BTC to a custodian or bridge Receive a wrapped BTC and then use that wrapped asset in lending protocols These models work, but they introduce counterparty risk. It also breaks the core Bitcoin preference for self-custody and trust minimization. The goal of TBV became to allow native Bitcoin to remain under predefined, objective withdrawal conditions, and still be usable as collateral in on-chain markets. How TBV Works Then David further explained TBV through a simple borrowing example. A Bitcoin holder creates a self-custodial Bitcoin vault. The Bitcoin is locked under objective conditions that define when it can be withdrawn. The user can withdraw according to those rules. Any other withdrawal path must also satisfy those same rules. There are no discretionary intermediaries. Babylon’s first product built on this infrastructure is native Bitcoin-backed borrowing through @aave v4. The flow is below as presented in the call: The key point is that the Bitcoin is not wrapped, bridged, or handed to any third party. The Key Technical Unlock: BABE David also explained why this is only becoming practical now. Ethereum can verify zero-knowledge proofs directly through smart contracts. Bitcoin does not have the same smart contract model. Previous approaches to verifying a zero-knowledge proof on Bitcoin required roughly one gigabyte of data, which David said would consume around 225 Bitcoin blocks. Instead, Babylon’s research team made the breakthrough behind BABE that allows zk proofs to be verified efficiently on Bitcoin. This allows the Ethereum state (the fact that you repaid your loan) to be verified and unlock your Bitcoin on the Bitcoin chain without any committee or any third party to make that decision for you. David connected this to Babylon’s recent research progress at the Science of Blockchain Conference. He first described the improvement as 1,000x, then corrected himself and said it was closer to 10,000x compared with the version Babylon had presented one year earlier. https://x.com/babylonlabs_io/status/2082092018143310266?s=20 What TBV Unlocks Beyond Lending During his presentation, Fisher framed TBV as programmable Bitcoin collateral. The first application is borrowing stablecoins and other on-chain assets against native Bitcoin. But the same collateral infrastructure could support a wider range of products over time, including: Fisher said the team has received positive feedback and market validation from builders and potential users. David emphasized that TBV is not limited to Ethereum or lending. The broader vision is objective conditions predefined to native Bitcoin, rather than intermediaries. Why Babylon Is Starting With Lending @Tristan0x15 asked why Babylon chose lending as the first application when TBV could support many categories. David’s answer was the team needed to validate the technology through one real product, not attempt to support every possible use case at once. Lending was the natural starting point because it is one of the largest categories in DeFi. Aave is the largest lending protocol, and Ethereum is the largest smart contract ecosystem. He also connected this back to Bitcoin’s original payment vision. If a user can borrow USDC against Bitcoin, they may be able to use the borrowed stablecoin without selling their Bitcoin and without relying on an intermediary. Current Borrowing Options for Bitcoin Holders Fisher compared once again Babylon’s TBV approach with the two main options Bitcoin holders have today. 1. Centralized lenders Users can borrow through exchanges, OTC desks, or centralized lending providers. Fisher said these products often charge borrowing rates of 7% or more, with some OTC providers above 10%. They also usually require users to transfer Bitcoin to a third party and often require identity verification. 2. Wrapped BTC in DeFi Users can also wrap Bitcoin and use it in protocols like Aave or @morpho. Fisher referenced borrowing rates around 3% to 5% on those protocols at the time of the call. This option gives users transparent on-chain markets, but it still requires wrapped Bitcoin. That means users either transfer Bitcoin to a third party or acquire wrapped Bitcoin elsewhere. Babylon’s goal is to combine the better parts of both models: Native BTC collateral Self-custody Transparent on-chain lending No wrapped BTC intermediary dependency Aave Integration & Go-to-Market Progress In the next part of the call, Fisher then gave a detailed update on the Aave integration. Listing a new collateral asset on Aave involves three governance stages: Temperature Check Aave Request for Comment (ARFC) Aave Improvement Proposal (AIP) The Temperature Check passed on June 10, 2026, with what Fisher described as strong support from the Aave community. He also noted that Aave founder @StaniKulechov had replied in support of the proposal, and that community members described the product as the type of Bitcoin product they had been waiting for. At the time of the call, Babylon was preparing for the ARFC, which Fisher estimated would happen around mid-August. The team is working with Aave Labs, LlamaRisk, and Certora on final reviews of the code and collateral parameters. If the ARFC passes, Babylon will determine a mainnet date before submitting the AIP required to activate the integration. Fisher grouped the go-to-market work into three areas: 1. User Acquisition Babylon launched the TBV testnet in late May and has been working directly with Bitcoin holders since then. Fisher named @Bedrock_DeFi, @GoMining, and 84 Labs @pumpspace10000 as participants, each with commitments up to 1,000 BTC. The team expects more announcements as the testnet and go-to-market work continue. 2. Distribution Partners Wallet support is a key dependency because TBV requires additional cryptographic signatures and secret generation beyond a standard Bitcoin transaction. Fisher grouped wallet partners into three categories. Hardware wallets @Ledger @KeystoneWallet @OneKeyHQ Software wallets @unisat_wallet @wallet MPC wallets @utila_io The broader point: different wallets serve different Bitcoin holder segments. Hardware wallets tend to serve conservative retail users and larger individual holders. Software wallets are more common among active individual users. MPC wallets are more common among institutions. Supporting all three categories helps TBV serve both retail and institutional Bitcoin holders. 3. Infrastructure Partners TBV also requires an ecosystem of infrastructure participants. Fisher mentioned several roles, including: Arbitrage and liquidation participants Vault Providers Universal Challengers Governance and Security participants He said Babylon has made strong progress preparing these roles and is confident the system will be ready by mainnet. Testnet Update: What the Team Has Learned Fisher shared the current state of the TBV testnet. The testnet launched on May 26 and had been running for two months and four days at the time of the call. More than 2,000 vaults had been created. Fisher thanked the community members for stress testing the system and said the testnet has already exercised every stage of the vault lifecycle: Active vaults Closure Redemption Expiration Liquidation Babylon also completed its first round of community testing. Some noticeable insights include: 70+ community members participated Users created vaults and tested key actions Participants looked for edge cases The team distributed about $5,000 in USDC rewards Fisher shared the testnet feedback results and found that the main area for improvement was vault creation. Tristan added that external testing is valuable because users surface issues internal teams often miss. David also thanked participants and said user feedback is one of the most important inputs for a startup building a new product. Fisher previewed a redesigned version of the testnet interface. He described it as more professional, more institutional, and more intuitive than the current version. Tristan clarified that the demo was running internally on Babylon’s development environment. In this update, users will be able to understand what is happening during the vault creation process more clearly, especially when Bitcoin confirmation time makes the flow feel slow. BABY Update: Validators, Delegation, and Value Accrual The call also covered the BABY token and validator ecosystem. Fisher noted that several validators have recently announced their plans to leave the validator business, including Cosmostation and other large validators. Babylon views this as an opportunity to revisit the validator set and foundation delegation strategy. One area under discussion is reducing the validator set while prioritizing Babylon Foundation delegations toward contributors and participants that support the TBV ecosystem. That could include some of the infrastructure partners required for the protocol to operate. The logic is as follows: Foundation delegation can help important ecosystem participants enter the network. If TBV gains traction, those participants should eventually acquire and stake BABY themselves. Over time, BABY tokenomics should become more aligned with TBV usage and value creation. Fisher also said Babylon continues to work with @a16zcrypto on TBV and BABY value accrual design. The team is exploring how value generated by TBV activity could flow into the Babylon ecosystem, while running simulations to test whether the designs are sustainable. The direction was clear: connect BABY more directly to adoption of TBV and the value created by the protocol. What to Expect Over the Next Three Months Community Q&A Highlights Here are some of the highlights from the community Q&A. - Is Babylon exploring AI applications for TBVs? Yes, but not for the initial launch. David said Babylon already uses AI extensively in development, including engineering productivity and internal security auditing. He also said the team is researching how AI systems can be given enough information about a protocol’s intended security properties to help evaluate whether the code satisfies those objectives. Longer term, Babylon is thinking about how AI agents could interact with TBV. But David was careful about the risks, especially prompt injection attacks that could expose private keys. Fisher summarized the direction as making the infrastructure “agent-friendly,” but this is still early. - Is October still the mainnet target? Yes, October is the current target. Fisher said the team expects internal security reviews, external audits, testnet work, and the bug bounty program to be substantially complete by then. But he repeated that launch timing depends on readiness across code, audits, go-to-market, macro conditions, and security risk. Tristan noted that Babylon has worked with six external audit firms and also uses an internal AI auditing system. David said different auditors are needed because the protocol has several distinct technical areas, such as: BABE cryptography Cross-chain protocol design Smart contracts for the Aave integration Fisher added that, including reviews from Aave Labs, LlamaRisk, Certora, and others, the protocol has gone through roughly ten separate audits or technical reviews. - Will current Bitcoin Staking users become TBV users? Some may, but not necessarily immediately. David said the composition of Bitcoin Staking participants has changed since launch. Many current participants access Babylon through exchanges, and exchanges tend to adopt new infrastructure more conservatively. He expects some current staking users to migrate to TBV over time, but also expects TBV to attract new users, just as Bitcoin Staking did. - What are Bitcoin holders and capital allocators saying? Fisher said the product is fundamentally a borrowing product, but users usually borrow for a reason. From Babylon’s conversations, many Bitcoin holders are interested in generating yield while keeping custody of their Bitcoin. The product gives them self-custodial Bitcoin plus access to borrowing at competitive on-chain rates. Users may then choose to deploy borrowed stablecoins into yield strategies. Fisher did not guarantee any specific outcome, but noted that lower borrowing costs can improve the spread available to users. David said one of the strongest reactions from potential users has been interest in building products without a trusted third party. This may be especially important for Bitcoin holders, while institutions are often more accustomed to custodians. - Is Babylon a product company or an infrastructure company? David’s answer: both. He does not see infrastructure and product as separate categories. Infrastructure is also a product. Babylon is currently focused on one specific product: native Bitcoin-backed borrowing through Aave v4 using TBV. After launch, user feedback will help determine whether Babylon expands vertically into more products or horizontally by supporting more builders. Tristan summarized the approach as using a product to validate infrastructure. - What comes after borrowing? Fisher said the immediate priority is expanding the borrowing product. Two examples already being explored with ecosystem partners are: Fixed-rate borrowing with @aegis_im Covered call products built on the borrowing capacity enabled by Aave Longer term, Babylon would like to see additional products built on native Bitcoin collateral, including: Credit cards Bitcoin-backed stablecoins Insurance products The team is already speaking with builders exploring those opportunities. Closing Thought TBV is moving from concept to product. Babylon has already proven demand for native Bitcoin infrastructure through Bitcoin Staking. Now the team is applying the same trustless design philosophy to borrowing, lending, and broader BTCFi. The next few months are about execution - improved testnet UX, further community testing, security reviews, Aave governance, BABY value accrual work, and a mainnet launch target in October. With these milestones, Babylon’s native Bitcoin-backed borrowing product could become the entry point for a much larger TBV ecosystem.