Babylon Protocol and Ledger announced a strategic partnership to introduce BTCVaults, enabling Bitcoin to serve as collateral in DeFi without third-party custodians.

How BTCVaults operates

The solution creates a dedicated Bitcoin script on mainnet that locks BTC into a protected vault while retaining on-chain custody by the owner.

Assets remain controlled by the user’s private keys in cold storage and can be referenced by other chains using a specific signing mechanism.

Signing mechanism and device integration

BTCVaults employs extractable one-time signatures so locked BTC can act as economic collateral for security assurances on other blockchains.

Ledger devices use a Clear Signing feature that displays and requests confirmation of the vault contract conditions directly on the hardware wallet screen.

Custody, yield and Ledger Live

Under this model, Bitcoin remains under full user control in cold storage while simultaneously participating in staking-like processes to generate yield.

The capability integrates into Ledger Live, transforming idle digital gold into an active financial instrument within the Ledger ecosystem.

Availability

The partners expect the functionality to become available to millions of Ledger users worldwide in the second half of this year.