Aave Moves Native Bitcoin Collateral From Forum to 6-Day Snapshot Vote

Bitcoin Collateral Goes to Snapshot Vote

Aave has moved a plan to recognize Bitcoin (BTC) held on its original network as loan collateral from the governance forum into a six-day Snapshot vote, with an initial cap of 300 BTC. Aave Labs placed the proposal on Snapshot on 2026-11-05, and the voting window runs six days, closing on 2026-11-11. Tokenholders are asked to decide whether Bitcoin kept in vaults on the Bitcoin network can back loans on Aave V4 without being bridged or converted into a tradable wrapper. For readers tracking the Aave price, the event is a protocol decision, not a market one; nothing in the vote record carries a market figure.

The first use case is simple: a user locks Bitcoin in a vault on its home network and borrows stablecoins against it. What Aave V4 would recognize as collateral is an ERC-20 record of the vaulted asset, and that record moves only inside the relevant contracts. It is not a wrapped token that a user can hold in a wallet or send to a crypto exchange. Loan funding would come from the liquidity hub of Aave V4, the shared liquidity pool layer of the upcoming version, which is being built as the lending dApp architecture of the protocol's next stage.

The proposal adds two spokes with separate jobs. A Babylon spoke takes Bitcoin (BTC) as the only collateral asset and processes the loans, while a BTC vault swap spoke handles settlement after a liquidation. Babylon Labs, which built the vault design, set out the handover in its October 14 proposal: a Snapshot pass would be followed by an Aave Improvement Proposal carrying the full risk parameter set, and a separate on-chain governance approval is still required before any market goes live. Aave Labs said it reviewed the integration design and supports the risk parameters. The Snapshot vote is a mid-stage gate rather than a final switch: it measures sentiment, and the binding decision sits one step further down the Aave governance path.

LlamaRisk Sets a 300 BTC Cap

The risk parameters came from LlamaRisk, which posted them to the Aave governance forum on October 23. The firm proposed an initial collateral cap of 300 BTC and a 78% loan-to-value ratio, meaning a borrower could draw up to 78% of the collateral value against vaulted Bitcoin (BTC). It also recommended a dedicated credit line for settling wrapped Bitcoin (WBTC) and a Chainlink BTC/USD SVR price feed for marking the collateral. None of these values is live: they are proposed settings for a market that does not exist yet, and each becomes binding only if governance adopts them.

The liquidation path is deliberately slower than on Aave's current markets. Because recovering Bitcoin from a vault can take several days, the proposal separates loan disbursement from actual collateral recovery. A liquidator is paid in wrapped Bitcoin first, and a participant holding repayment rights later clears the vault debt and pulls the Bitcoin out. Even when a participant recovers Bitcoin directly, an obligation to deliver WBTC can remain, sized by the borrowing asset type, the fees and the borrower protection amount written into the contract. Borrowing against vaulted Bitcoin is therefore secured lending on Aave's own book, a different structure from the borrowed-funds mechanics of margin trading.

Two supporting safeguards sit around the arrangement. In its assessment document, published the same day as the parameter proposal, LlamaRisk states that high- and medium-severity findings from the audit process were resolved, and it recommends a proof-of-reserves mechanism so the Bitcoin inside the vaults can be verified independently. The document also sketches a staged rollout for deposits: initial deposits restricted to approved institutions and partners, with access widened to general users afterward. No date is set for that widening, and the 300 BTC cap stays in place until a later governance step raises it.

From Snapshot to On-Chain Approval

Read against the proposal text and the vote configuration, the 300 BTC figure is doing specific work: it is small enough to act as a fuse for an arrangement whose settlement runs through vault recovery measured in days, not seconds. The Snapshot outcome will not itself move collateral on-chain. A pass sends the file to Babylon Labs for the full AIP, and a further on-chain vote decides whether any market activates; a failure leaves the existing WBTC-backed markets untouched and the vault design on the shelf. Until the AIP lands, the arrangement sits exactly where the Snapshot vote leaves it, with Aave Labs and Babylon Labs holding the proposal between the forum and the on-chain record.