Today, we are pleased to announce that a16z crypto is officially supporting Project Babylon to jointly advance the development and scaling of its innovative infrastructure—a trustless Bitcoin vault. This technology aims to empower native Bitcoin, enabling it to be used as collateral in on-chain financial systems. In addition to the $15 million funding, we look forward to leveraging a16z crypto's expertise in strategic guidance and its deep experience investing in foundational technologies to drive this vision forward.

a16z crypto has a long history of investing in defining industry-specific infrastructure. This collaboration is based on the shared belief that Bitcoin is gradually becoming a new global collateralized asset, and a key step in realizing this vision is building trustless infrastructure that allows Bitcoin to fully realize its financial functions while maintaining its fundamental attributes.

The U.S. Commodity Futures Trading Commission (CFTC) (https://www.cftc.gov) recently included Bitcoin in the list of acceptable derivatives collateral, marking a deepening trend of financial institutions adopting Bitcoin in trading. Currently, several major banks and trading institutions have launched Bitcoin-based lending products, while large fund management institutions and asset management companies are increasingly incorporating Bitcoin into their long-term capital allocation strategies. Meanwhile, consumer-facing infrastructure continues to upgrade; for example, MetaMask recently announced support for native Bitcoin functionality. According to Bloomberg Intelligence data, the assets under management of U.S. spot Bitcoin ETFs have exceeded $120 billion, further confirming this trend.

Despite strong growth momentum, the infrastructure for using native Bitcoin as collateral remains limited. Currently, most on-chain solutions rely on custodial lending or encapsulated forms of Bitcoin. While these models are feasible, their limitations become increasingly apparent as applications deepen: currently, less than 1% of Bitcoin assets are encapsulated, while over $1.4 trillion in Bitcoin assets are idle—to use them as native collateral, one must either relinquish custody or convert the assets into encapsulated versions.

Custody requires users to completely relinquish ownership of their Bitcoin. Encapsulating Bitcoin, on the other hand, involves transferring the asset to another system, which in many jurisdictions may be considered both a disposal of the original asset and an acquisition of a new one. This dual designation can raise complex tax, compliance, and operational issues, which is precisely what many institutions and long-term holders seek to avoid.

Babylon is forging a different path.

We are building a trustless Bitcoin vault. This scheme allows raw Bitcoin to be verifiablely locked and used directly as collateral without encapsulation, custody, or intermediaries. Built on top of the Bitcoin infrastructure, the Bitcoin vault enables external applications to verify the locked status of Bitcoin and automatically enforce collateral conditions, unlocking, or liquidation rules through cryptographic mechanisms (rather than human discretion). Its core technology employs witness encryption and obfuscated circuits, enabling efficient verification of zero-knowledge proofs on the Bitcoin network.

Bitcoin is always on the Bitcoin network.

Users have complete control over their private keys.

Assets, requiring no form conversion.

Bitcoin Vault allows Bitcoin to seamlessly integrate into both decentralized and traditional financial systems while fully preserving the trustless nature of Bitcoin.

Bitcoin vaults significantly expand the application scenarios of native Bitcoin. They enable lending, stablecoins, insurance, credit issuance, and structured products without relying on asset encapsulation or re-collateralization. Traditional financial markets have already shown clear demand for such products, as evidenced by the numerous banks offering Bitcoin-backed loans. Babylon can achieve the same financial activities while maintaining the native form and integrity of Bitcoin.

For institutions, Bitcoin vaults can reduce counterparty risk, simplify operational processes, and eliminate regulatory uncertainty arising from asset conversion. For users, they provide practical financial functions while fully preserving the fundamental characteristics that give Bitcoin its value.

At the same time, Babylon Bitcoin Vault opens up new application scenarios for the utility of the BABY token. As applications, vault providers, and integrated ecosystems around Bitcoin Vault continue to develop, BABY's role in the ecosystem will gradually expand to support system coordination, participation incentives, and future value capture mechanisms. Its economic model design is still under active refinement, but Bitcoin Vault has laid a solid foundation for BABY to play a significant role in a range of future native Bitcoin financial products.

As Bitcoin's applications in the global financial sector become increasingly widespread, the infrastructure supporting its development must evolve towards scalable, verifiable, and trustless mechanisms to meet institutional-grade requirements. The involvement of a16z crypto further solidifies our goal: to fully commit to building the Bitcoin vault infrastructure necessary for Bitcoin to fulfill this crucial role.

Our mission is to enable Bitcoin to become an efficient, programmable, and native collateral without sacrificing its core principles. This is not about replacing the existing system, but about expanding the possibilities of finance and providing a new, trustless alternative that aligns with the Bitcoin philosophy and the needs of modern financial markets.

We are building a future where Bitcoin can support global financial applications while remaining true to its essence—an asset rooted in its own blockchain and custodied by its users. The next chapter for Bitcoin will begin with Bitcoin Vaults, and we are building the infrastructure to realize this vision. We are honored to have the support of a16z crypto in working towards this goal.

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