Aave V4 native Bitcoin lending requires WBTC for liquidation despite native BTC collateral

Aave V4's native Bitcoin market requires Wrapped Bitcoin (WBTC) for all liquidation settlements, even when borrowers use native BTC as collateral. The system has two liquidation routes—direct and via Liquidation Liquidity Provider—but both require WBTC to cover application fees and borrower surplus payments. Babylon Labs' proposed market would hold native BTC in vaults with internal accounting, but liquidators must still transfer WBTC to repay debt. The integration contracts remain on Sepolia testnet, not mainnet.