Today we’ll kick things off by having a look at BOB’s unique Hybrid Layer 2 model, and how it combines the best of Bitcoin and Ethereum to put Bitcoin at the heart of Decentralized Finance (DeFi).
If you are struggling to understand how our Hybrid L2 works, or have wondered why Bitcoin isn’t used more in lending, staking, or other DeFi activities, keep reading. We’ll keep it as simple as possible.
The biggest opportunity of the decade
Imagine you have a big bank vault full of gold coins. It’s incredibly secure and pretty much unbreakable. But the vault has one problem, it only lets you put in or take out coins. This means you can’t do more complex things like earning interest.
That’s essentially what Bitcoin is like today. It’s a great store of value, but not as good for doing the more advanced stuff you might have seen in DeFi.
Although lots of people would like to earn yield on their Bitcoin, currently only a very small fraction of Bitcoin is used in DeFi - just 0.3% compared to 30% of ETH. That’s a 100x gap, equivalent to about $700M in today’s market.
BTC on the Bitcoin network is incredibly safe and secure, just like the gold in the bank vault, but as soon as you take it anywhere else to put it to work and earn a yield, you need to accept some additional risk. With Bitcoin this means bridging to another chain where it can be used in DeFi, and most current BTC bridges require you to trust that they are going to behave properly and not run off with your precious assets.
If we can make it possible for Bitcoin to be used in DeFi while still retaining Bitcoin security for the whole process, starting at the Bitcoin layer 1, bridging to another chain and then deploying in an app to earn yield, then the main obstacle to the growth of Bitcoin DeFi vanishes. This is the opportunity of the decade.
Putting Bitcoin at the heart of DeFi
BOB’s Hybrid Layer-2 solves these problems by combining the strengths of Bitcoin and Ethereum: Bitcoin as the best known, most secure and censorship resistant asset, fused with the versatility, ease of use and innovative DeFi apps of Ethereum.
The combination of Bitcoin’s unmatched security and all the cool DeFi stuff you see on Ethereum is designed to put Bitcoin at the heart of DeFi, unlocking the trillions of dollars of Bitcoin currently sitting idle on the Bitcoin network.
There are three main reasons why the unique hybrid L2 model makes BOB the best and safest place to earn yield on your Bitcoin:
- Bitcoin security: BOB will be a Bitcoin Secured Network (BSN). That means Bitcoin secured DeFi transactions, Bitcoin secured bridges, Bitcoin secured everything - all backed by billions of dollars of Babylon-staked Bitcoin.
- Ethereum DeFi: As well as being a BSN, BOB is an Ethereum roll up in the Superchain ecosystem, providing fast, cheap transactions, and access to the full range of innovative DeFi applications such as DEXes, lending and borrowing, NFTs, and games.
- Trustless Bitcoin deposits: With BOB’s BitVM bridge, you will be able to send Bitcoin directly from the main Bitcoin network to BOB without needing to trust a third party, all secured by Bitcoin. This is dramatically more secure and decentralized than other Bitcoin bridges.
That means the entire Bitcoin DeFi journey on BOB will be secured by BTC. This is not true of other chains.
The Hybrid L2 is the best place to use Bitcoin in DeFi
Thanks to the hybrid model, BOB is the best place to use Bitcoin and Bitcoin liquid staking tokens (LSTs) in DeFi. Because BOB has Bitcoin security provided by staked Bitcoin, there is a strong self-reinforcing flywheel effect.
The more LSTs that are staked and used in DeFi on BOB, the more transaction fees are generated by the network, some of which are provided as yield back to the staked Bitcoin. More LSTs on BOB means more yield for stakers, which attracts even more LSTs which grows the yield again… and on and on.
Safer Bitcoin bridging with BitVM
Most existing BTC bridges force you to trust a group of people to hold your BTC safely, giving you a wrapped copy you can use on the destination chain. If those people turn rogue or make a mistake, you could lose all of your coins.
BOB’s Hybrid L2 changes that using BitVM, which is revolutionary tech that means:
- As long as just one honest person is watching, nobody can cheat, and that person can be you yourself.
- You don’t have to trust any single company or group to keep your BTC safe.
If someone tries to cheat, anyone can raise a “challenge” and show the world what’s wrong. The bad guys lose, and your coins stay safe.
Making Bitcoin DeFi more accessible
It’s easier to access Bitcoin DeFi on BOB with best in class bridging between BOB, Bitcoin and Ethereum. Plus BOB Earn lets you deploy directly into Bitcoin Liquid Staking Tokens (LSTs), Uniswap and many more top tier DeFi apps with just a single click.
Looking ahead, any blockchain that is able to read the Bitcoin network - like Solana, Tron, Sui, Polkadot, and many others - will be able to connect to BOB via a Bitcoin secured bridge. That means fewer detours, simpler cross-chain swaps and trades, and of course, security underpinned by Bitcoin.
What does this look like for you?
BTC Hodler: You may have some BTC sitting idle. You can move it into BOB’s Hybrid L2 without giving up control, put it to work with one click, and get access to a number of different DeFi rewards and Bitcoin yield.
DeFi power user: If you are active on Ethereum’s DeFi scene, you can easily bring ETH and stablecoins over to BOB for fast swaps into BTC variants and back, and soon without a week-long wait. BOB’s trust-minimized bridging will have Bitcoin finality, so your transactions settle securely and quickly. You also get direct access to new liquidity coming from BTC’s massive pool, meaning bigger trades and new opportunities for yield.
Developer: Already comfortable with Ethereum dev tools? On BOB, you use the same tools but also tap into Bitcoin’s huge user base. You can leverage Ethereum’s best dev infrastructure to spin up dapps fast, and if you want to reach other chains, BOB’s Hybrid L2 makes it simple to connect them—all under Bitcoin’s security.
Putting Bitcoin at the heart of DeFi
BOB’s Hybrid Layer 2 aims to build a DeFi ecosystem fully secured by Bitcoin, to help unlock the idle trillions of dollars of BTC just waiting for the right opportunity to earn some yield. For Bitcoin holders to make this leap, whether they are small retail investors or massive institutions, we need the Bitcoin secured bridges and Bitcoin secured transactions, all made possible by the Hybrid L2. Then we expect to see Bitcoin DeFi explode.
