Stanford professor backs Babylon as a new way to use Bitcoin as collateral
Stanford professor backs Babylon, a decentralized protocol designed to let Bitcoin holders use their assets as collateral without relying on intermediaries. The move reflects a broader effort to rethink how Bitcoin can become productive while remaining under user control.
Traditionally, Bitcoin owners who want to generate yield depend on third parties. These include stablecoin issuers or crypto exchanges that convert Bitcoin into other assets for lending. In that process, users lose direct control of their holdings. Babylon proposes a different structure. Its protocol enables Bitcoin collateralization without transferring custody.
Babylon was co-founded by Stanford professor David Tse and Fisher Yu. The company is building infrastructure aimed at removing custodial middlemen from Bitcoin-backed lending. This approach directly challenges centralized services that dominate the current ecosystem.
The backing of Babylon highlights ongoing interest in decentralized systems that prioritize control and transparency. For decision-makers, this shift raises practical questions about trust, custody, and long-term system design.
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How Babylon’s protocol removes intermediaries from Bitcoin lending
Babylon has developed a decentralized protocol called BTCVaults. The protocol allows Bitcoin to be used as collateral without handing assets to a third party. This design addresses a core concern in crypto lending: loss of private key control.
According to Tse, when Bitcoin is sent to intermediaries, users give up ownership in practice. Babylon’s protocol avoids that outcome. Bitcoin remains under the user’s control while still being made productive.
Babylon sees centralized platforms such as Coinbase, Kraken, and Tether as its main competition. Unlike those services, Babylon does not take possession of assets. Instead, it relies on protocol-level design to enable collateralization.
This approach reflects a broader decentralized finance philosophy. Removing intermediaries is not only about efficiency. It is also about redefining control within financial systems.
For leaders assessing crypto infrastructure, these distinctions carry operational implications. Architecture choices influence risk exposure and user confidence.
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Funding, roadmap, and research-driven origins
Babylon recently raised $15 million from a16z crypto, the crypto-focused arm of Andreessen Horowitz. The company did not disclose its valuation. The funding supports ongoing development and future integrations.
Babylon plans to integrate its technology with the lending protocol Aave in the second quarter of 2026. At present, the company does not generate revenue. It expects revenue after the Aave launch.
The company employs more than 40 people and operates without a CEO. David Tse serves as research scientist, while Fisher Yu is the CTO. Tse has been a Stanford professor for more than a decade and leads a blockchain research lab. He holds a PhD from MIT and previously taught at UC Berkeley for 18 years.
Tse describes Babylon as a way to extend the impact of academic research. In academia, results often remain limited to papers. A startup, by contrast, turns ideas into products people can use.
As decentralized finance matures, how will research-led ventures like Babylon shape the future of Bitcoin infrastructure?
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