Babylon Labs has raised $15 million in funding from a16z crypto to support the development and scaling of Babylon Trustless BTCVaults, an infrastructure system designed to allow native bitcoin to be used as collateral across onchain financial applications, the company said in a blog post on Wednesday.
The platform’s BABY token was higher by 13% after the a16z investment.
The investment will be used to advance the core technology behind BTCVaults and support integration with external applications that require verifiable, non-custodial bitcoin security, the company said.
a16z crypto will also provide strategic input based on its experience investing in blockchain infrastructure.
BTCVaults are designed to allow bitcoin to be locked on the Bitcoin base layer while remaining verifiable to external systems. The system is intended to allow applications to confirm that BTC collateral remains in place and to enforce conditions such as unlocking or liquidation through cryptographic mechanisms, rather than custody controls or wrapped representations of the cryptocurrency.
Most existing on-chain Bitcoin security solutions rely on custodian banks or wrapped BTC, which require users to relinquish control of their assets or convert the cryptocurrency to another representation.
Babylon’s approach is designed to allow BTC to remain native to the Bitcoin network while still being used in financial applications.
The development of BTCVaults comes amid growing institutional use of bitcoin as security. Regulators, banks, asset managers and trading firms have increasingly recognized BTC in lending, derivatives and investment products, while the majority of the crypto’s supply remains untapped in onchain financial systems.
BTCVaults are designed to support a variety of financial use cases, including loans, lending and other collateralized products, without requiring custodians or asset wrapping, Babylon said. The infrastructure is intended to be compatible with both decentralized and traditional financial systems.
The funding will support Babylon’s goal of enabling BTC to serve as productive security while maintaining self-sufficiency and operation on the Bitcoin base layer.
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