Bitcoin Layer 2s will begin to become the dominant place to engage with DeFi. We believe we will see the start of a major shift in the developer community towards Bitcoin DeFi, as smart contract functionality, rollups, and new dev tools are rapidly made available to builders on Bitcoin.
Bitcoin staking, including both liquid staking tokens (LSTs) and other DeFi deployments, will take off in 2025 and significantly impact the entire DeFi space. Bitcoin is an entirely different beast to Ethereum or other Layer-1s. It has become increasingly institutionalised, has massive brand recognition and proven security, and Bitcoin holders want to do more with their investment.
It's also important to remember that this isn’t a zero-sum game against other networks. A growing Bitcoin DeFi landscape will only increase the potential size of the pie for all ecosystems.
2024—Laying the foundations
Bitcoin Layer-2s have been operating since 2018 and we have had wrapped Bitcoin assets on Ethereum since 2019. However, it wasn’t until last year that we saw a clear pathway for bringing Bitcoin’s unparalleled security and liquidity to DeFi.
Babylon Bitcoin staking: With the launch of non-custodial Bitcoin staking, Babylon helped change the game. They now have almost $6B BTC staked and have started their phase 2 testnet rollout.
Bitcoin Liquid Staking Tokens: Building on the back of Babylon’s staking innovation, protocols like Lombard, Solv, and Bedrock launched Bitcoin LSTs.
BitVM bridges: The first prototype BitVM Bitcoin bridges were successfully tested at the end of 2024, providing a trust-minimized route for bringing Bitcoin onto EVM chains.
Hybrid L2: BOB’s unique Hybrid L2 model combines the strengths of the Bitcoin and Ethereum ecosystems, creating the ideal home for Bitcoin DeFi.
A 100x opportunity
We are still early… Total Value Locked (TVL) sits at just 0.3% of Bitcoin’s market cap, compared to Ethereum’s 30%. That’s a 100x opportunity.
BOB’s mission is to close this gap, positioning Bitcoin as the backbone of decentralized finance.
Growing appetite for Bitcoin DeFi
Both retail and institutional investors are starting to see the potential of putting their Bitcoin to work.
Using data from our good friends Bitcoin Layers, we can see an increase in both the number and variety of Bitcoin assets that have been wrapped and are available to be used in DeFi.
At the start of 2024, there were approximately 235k BTC comprising seven main variants, including wBTC (158k BTC) and BTCB (60k BTC).
Since then, we have seen a 40% increase to 331k BTC, including a much wider variety of wrapped assets and LSTs.
BitVM will reinvent bridging for Bitcoin DeFi
The advancement of BitVM and the launch of the first bridge prototypes were among the key highlights of 2024. BitVM is so important because it addresses two of the biggest obstacles to true Bitcoin DeFi - by enabling trust-minimized BTC bridges and Bitcoin-secured rollups.
Unlike existing multisig Bitcoin bridges, BitVM bridges do not rely on centralized entities and ensure funds cannot be stolen as long as one honest node remains online, which can be the depositor themselves.
Made possible through our collaboration with Fiamma, BOB’s BitVM Bitcoin bridge is planned to go live in 2025 as part of Phase 2 of BOB’s Hybrid L2 roadmap. This will allow us to:
- Implement secure and fast BTC transfers, usually completed in well under an hour.
- Allow users to easily deposit and withdraw BTC from BOB without needing to trust a 3rd party.
While it will likely take more than 2025 to see the full impact of BitVM, particularly with more risk averse institutional users, the fact that we have finally solved BTC bridges and L2s will be a big factor in future growth of Bitcoin DeFi.
The flywheel effect of Bitcoin Secured Networks like BOB
The growth of Bitcoin DeFi in 2025 will also be accelerated by Bitcoin Secured Networks (BSNs) like BOB, which can create a self-reinforcing cycle of liquidity and yield.
Staked BTC used in DeFi on BOB generates transaction fees, a portion of which will be shared with Babylon BTC stakers, therefore encouraging even more BTC to enter staking.
This compounding cycle makes BSNs like BOB the best place to use Bitcoin LSTs in DeFi. The more liquidity added and the more DeFi activity we see, the greater the potential staking returns and therefore the more attractive the network is to new users.
Improving accessibility
Last but not least, improving accessibility will continue to be essential for driving Bitcoin DeFi adoption.
BOB leads the charge here, thanks to our 1-click BTC staking solution, which has already been integrated into Pell and will soon be live on StakingRewards.com, Xverse Earn, and Everstake.
Additionally, the entry of leading Ethereum DeFi projects into the world of Bitcoin DeFi also signals broader adoption this year. This can be seen with Aave’s recent temp check to deploy on BOB, which not only brings proven DeFi functionality to Bitcoin, but a wider user base.
By prioritizing ease of use, and continuing to partner with notable projects, BOB will ensure that Bitcoin DeFi becomes as widely available as possible.
BOB will become the home of Bitcoin DeFi
BOB’s mission for 2025 is clear—to position Bitcoin as the backbone of DeFi.
With our Hybrid Layer-2 model entering into Phase 2, we will soon be that much closer to combining Bitcoin’s unmatched security with Ethereum’s versatility, unlocking a wealth of new possibilities for DeFi.
Having successfully tested a trust-minimized BitVM bridge prototype in conjunction with Fiamma, and recently announcing that we will integrate with Babylon to become a Bitcoin Secured Network (obtaining Bitcoin finality via staking), we are setting the stage for unparalleled scalability and security.
BOB will be the most secure and accessible hub for Bitcoin DeFi, and we invite you to come on this journey with us.
