bitcoinlfg

Tag: insurance

  • BTC staking platform Babylon teams up with Aave for Bitcoin-backed DeFi insurance

    BTC staking platform Babylon teams up with Aave for Bitcoin-backed DeFi insurance

    Babylon teams up with Aave for Bitcoin-backed DeFi insurance

    • Babylon and Aave partner to enable native BTC as collateral for DeFi lending.
    • BTC can now back decentralised insurance pools, earning yield if unused.
    • Users retain full control of their Bitcoin while accessing DeFi liquidity.

    In a groundbreaking move for the decentralised finance (DeFi) ecosystem, Bitcoin staking platform Babylon has announced a partnership with Aave, one of the largest decentralised lending protocols.

    The collaboration aims to allow Bitcoin (BTC) holders to use their native, unwrapped BTC as collateral for lending and to participate in a pioneering DeFi insurance model.

    This will reshape how Bitcoin interacts with DeFi, unlocking liquidity while maintaining the security that Bitcoin users expect.

    Native Bitcoin collateral comes to DeFi

    Traditionally, using Bitcoin in DeFi required wrapping it into a tokenised version such as WBTC, which introduced custodial risk and extra steps. Babylon’s partnership with Aave eliminates this barrier by enabling users to deposit their native BTC directly as collateral.

    Through Babylon’s trustless Bitcoin Vaults, BTC can be locked in a time-locked contract on its own blockchain and recognised by Aave’s hub-and-spoke lending architecture.

    This allows users to borrow stablecoins or other crypto assets while keeping full control of their Bitcoin keys.

    The move is expected to significantly expand BTC liquidity in DeFi. Currently, even the largest wrapped Bitcoin initiatives account for less than 1% of Bitcoin’s total market cap.

    Babylon’s own staking product secures over 56,000 BTC, demonstrating strong demand for productive uses of Bitcoin.

    By unlocking native BTC for lending, the partnership could bring a substantial portion of the dormant Bitcoin supply into productive DeFi applications, potentially transforming lending markets.

    DeFi insurance backed by Bitcoin

    Beyond lending, Babylon is preparing to extend its vaults into the insurance sector, a development that could redefine how DeFi protocols manage risk.

    The proposed model allows BTC holders to deposit their Bitcoin into decentralised insurance pools.

    These pools would serve as coverage against protocol hacks and other failures. Depositors earn yield if no claims occur, while the pool provides liquidity for payouts in the event of a validated exploit.

    This approach turns Bitcoin into a foundational asset for DeFi risk management, offering a new avenue for yield generation while safeguarding the ecosystem.

    Babylon co-founder David Tse told CoinDesk that the insurance initiative is still in development, with an official announcement expected in January 2026.

    Testing for the integrated BTC lending and insurance products is scheduled to begin in early 2026, with a broader rollout planned around April of the same year.

    The combination of Babylon’s secure vault design and Aave’s extensive liquidity network creates a framework that prioritises both safety and usability, a balance often missing in cross-chain and custodial solutions.

    Transforming Bitcoin’s role in DeFi

    This partnership addresses longstanding challenges in Bitcoin DeFi adoption.

    By removing the need for wrapped assets and custodial intermediaries, it reduces systemic risk while enabling Bitcoin holders to put their capital to work more efficiently.

    Users can participate in lending and insurance activities without relinquishing control of their Bitcoin, aligning with the core principles of security and decentralisation that have long defined the Bitcoin network.

    Experts in the space view this collaboration as a potential catalyst for broader adoption of BTC in decentralised applications.

    Unlocking even a small fraction of Bitcoin’s supply for lending and insurance could significantly deepen liquidity and reshape market dynamics.

    For the average user, it translates into safer, more streamlined, and more productive ways to generate yield from their holdings.

    Share this article
    Categories
    Tags

    Source link

  • Bitcoin may be world’s largest insurance company

    Bitcoin may be world’s largest insurance company

    • Pompliano argues that Bitcoin’s unique properties make it an attractive insurance asset for a variety of reasons.
    • He says Bitcoin provides insurance against a variety of risks, including, currency debasement and sovereign default.
    • Bitcoin critics however point to things like the volatile nature of crypto assets and meagre adoption as reasons why it might not be the global insurance company.

    Anthony Pompliano, a venture capitalist and popular Bitcoin advocate, argues that BTC could be considered the largest insurance company in the world.

    The investor says the idea was proposed to him at a breakfast meeting with two investors, whose point suggested that the world’s largest insurance company may not “look like” the typical insurance company.

    Why Bitcoin could be the insurance

    Pompliano’s argument, published in the latest edition of The Pomp Letter, is based on the idea that Bitcoin provides insurance against a variety of risks, including, currency debasement, sovereign default, undisciplined monetary and fiscal policy, and economic censorship. 

    He explained:

    “Just as there are different insurance policies that serve different purposes, Bitcoin is different things to different people. And just as most policyholders don’t want to ever have to use their insurance, most bitcoiners realise that bitcoin’s success will likely come on the heels of major issues in the legacy financial world.”

    On what exactly makes Bitcoin an insurance, the entrepreneur listed a number of reasons.

    He says Bitcoin is a one-time purchase, and it comes with certain advantages. Unlike traditional insurance policies, BTC doesn’t require ongoing premiums. If you buy early, Bitcoin comes as a cheap premium and much more expensive when done later.

    The second reason is that cryptocurrency is a decentralised asset that is not subject to the control of any one entity, which makes it more reliable than traditional insurance companies. It also has an inverse relation to catastrophe in traditional finance, the latest example being when BTC price rose amid the US banking crisis.

    Also, Bitcoin is a global asset that can be accessed by anyone, anywhere in the world, which makes it more accessible than traditional insurance products. As an insurance, its programmatic nature means holders don’t need to submit claims and wait for someone to judge whether to honour it or not.

    Bitcoin critics may disagree, but…

    Although Bitcoin continues to see major adoption across the globe, the argument such as the one highlighted by Pompliano has not escaped crypto critics.  

    For some, BTC remains too volatile to be considered a reliable insurance asset. Another argument is that the digital asset hasn’t achieved the adoption levels that would make it a practical insurance choice for most people.

    Pomp says the idea is still a viable one, especially with the possibility that Bitcoin can be an insurance against events like inflation and economic collapse. Most of these events have largely been “uninsurable.”

    “No insurance company is going to write you a legitimate policy against high inflation. They won’t write you a policy against government seizure of your assets. The insurance companies historically have not covered hyperinflation or economic collapse,” the investor argued.

    He also thinks one doesn’t need to hold huge amounts of BTC to tap into the benefits. Putting about 1-3% of investment allocation into bitcoin can be an effective hedge against negative impact of economic risks.

    Share this article
    Categories
    Tags



    Source link