On May 28, the hybrid Layer 2 project BOB (Build on Bitcoin) launched the BOB 101 user education column on its official website and published its first article What is a Hybrid Layer 2? - What is a Hybrid Layer 2? The column aims to allow more people to understand the underlying logic and upper-layer architecture of BOB in a zero-threshold and fool-proof way, as well as how BOB achieves the vision of Bitcoin DeFi Home.
The following is a compilation and arrangement of the original text published by the author on the BOB official website. This article focuses on BOBs unique hybrid Layer 2 model and how it combines the advantages of Bitcoin and Ethereum to put Bitcoin at the core of the DeFi world. Enjoy:
The crypto industry has a once-in-a-decade opportunity
Imagine you have a large bank vault full of gold coins that is very, very secure and almost unbreakable. But there is one problem with this vault: it only allows you to deposit or withdraw gold coins, but not to perform any complex financial Lego operations to earn interest.
This is the current situation of Bitcoin. As we all know, Bitcoin is a good means of storing value and is the oldest, most well-known and most secure blockchain and asset in the crypto space. Recently, it has continued to set new historical highs by setting new historical highs and breaking through the psychologically important $110,000 mark.
However, Bitcoin cannot build the Lego blocks of financial applications through smart contracts like Ethereum, such as Restaking, revolving lending, etc. The vast majority of Bitcoins are still idle in wallets and fail to generate income, and the capital utilization rate of Bitcoin holders is almost zero.
As can be seen from the figure below, Bitcoins TVL accounts for only 0.2% of Bitcoins market value, while Ethereums TVL accounts for 35% of Ethereums market value. The difference in capital utilization between the two in the DeFi field is 150 times. BOBs goal is to narrow this gap by releasing trillions of dollars of Bitcoin liquidity and bringing it into the DeFi field.
Bitcoin on the Bitcoin network is very safe, just like gold in a bank vault, but once you put it somewhere else to earn income, you may face a certain degree of risk. Because you need to cross-chain Bitcoin from the native Bitcoin network to other public chains to use their smart contracts to perform DeFi combination operations, and the cross-chain process requires relying on third-party custodians or multi-signature bridges to exchange and package BTC, which poses the risk of centralized institutions doing evil, and your BTC may be taken away by them without your knowledge.
If we can make Bitcoin flexibly applicable in the DeFi world while maintaining the high security of Bitcoin itself throughout the process, starting from the first layer of Bitcoin, crossing to another public chain, and then deploying it in applications to earn income, then Bitcoin DeFi will explode like the Ethereum DeFi ecosystem, or even more prosperous than the Ethereum DeFi ecosystem. Building a Bitcoin native DeFi ecosystem will become one of the hottest emerging sectors in the crypto field in 2025, and it is also a rare opportunity for the crypto industry in a decade.
Bitcoin is the core of the DeFi world
BOB’s unique hybrid L2 model combines the strengths of both ecosystems – Bitcoin’s security and dormant BTC capital, and Ethereum’s DeFi innovation and versatility.
The unparalleled security of Bitcoin combined with all the innovative DeFi features on Ethereum aims to put Bitcoin at the heart of the DeFi world, unlocking trillions of dollars of liquidity currently sitting idle on the Bitcoin network.
The unique hybrid L2 model makes BOB the best and safest place to earn yield on Bitcoin for three main reasons:
Bitcoin security: In December last year, BOB announced the integration of the Bitcoin Secure Network (BSN) with Babylon, creating a safer, lower-threshold, and easier channel for users to participate in Bitcoin staking. The security of transactions from BTC cross-chain to DeFi is guaranteed by Babylons BTC staking assets worth billions of dollars.
Ethereum DeFi: BOB is not only BSN, but also an Ethereum rollup in the super chain ecosystem, providing fast, low-cost transactions and access to various innovative DeFi applications such as DEX, lending, NFT, and chain games.
Trustless Bitcoin Deposits: Using BOBs BitVM bridge, Bitcoin can be sent directly from the Bitcoin main network to BOB without trusting a third party, all of which is protected by the security of Bitcoin itself, which is more secure and decentralized than other Bitcoin bridges that require third-party custody.
To sum it up in one sentence: All DeFi operations on the BOB network will be guaranteed by the security of the Bitcoin network itself, rather than relying on any other third-party organization, which is something other Layer 2s do not have.
Hybrid L2 is the best place to use Bitcoin in DeFi
Thanks to the hybrid L2 model, BOB is the best platform for using Bitcoin and Bitcoin Liquid Staking Tokens (LST) in DeFi. Because BOB has the Bitcoin security provided by Bitcoin LST, there is a strong self-reinforcing flywheel effect.
The more LST staked on BOB and used in DeFi, the more transaction fees the BOB network generates, some of which are returned to stakers as income. The more LST on BOB, the higher the income stakers get, which in turn attracts more LST to stake, further increasing income... and so on.
Using the BitVM bridge for more secure Bitcoin cross-chain
As we all know, existing Bitcoin cross-chain bridges usually rely on centralized entity organizations, such as Wrapped Bitcoin (wBTC). The security of these cross-chain bridges depends on the honesty and cost of these centralized entities. There is a certain centralized single point risk. Once they run away, you will lose all your assets. The BitVM bridge introduces a more superior security mechanism: as long as BTC L1 is secure and there is at least one honest node in the network that can execute on-chain disputes, users can safely deposit and withdraw BTC. Users do not have to trust any company or organization to protect the security of their assets.
Completely eliminating the need for third-party cross-chain bridges in BTC DeFi applications is an important step in unlocking Bitcoins trillion-dollar potential in the DeFi market. The BitVM bridge has also successfully consolidated BOBs position as the home of Bitcoin DeFi, providing a most secure and trust-minimized way for Bitcoin DeFi and Bitcoin interest-bearing businesses.
Make Bitcoin DeFi more convenient
BOB can provide users with first-class cross-chain services between BOB network, Bitcoin network and Ethereum network, allowing users to access Bitcoin DeFi on BOB more easily and conveniently. In addition, BOB Earn allows users to deploy to Bitcoin Liquid Staking Token (LST), Uniswap and many top DeFi applications with one click.
Going forward, any blockchain network that can read the Bitcoin network — such as Solana, Tron, Sui, Polkadot, etc. — will be able to connect to the BOB network through the BitVM bridge. This means fewer detours, simpler cross-chain and transactions, and of course, the security guaranteed by the underlying Bitcoin.
What does BOBs hybrid L2 model mean to you?
BTC holders: Users can transfer idle BTC to BOBs hybrid L2 layer and easily earn income in Bitcoin DeFi through BOBs One-click Bitcoin DeFi function.
DeFi enthusiasts: For those DeFi enthusiasts who are often active in the Ethereum DeFi field, they can easily cross-chain ETH and stablecoins to the BOB network and quickly exchange them for Bitcoin derivative assets. The BitVM bridge launched by BOB has Bitcoin Finality, which can greatly improve the security and decentralization of Bitcoin cross-chain. Users can also directly access new liquidity from BTCs huge capital pool, which also means greater trading volume and new profit opportunities.
Developers: In the BOB network, developers can use the same tools as the Ethereum network while taking advantage of Bitcoins huge audience. Developers can use Ethereums best development infrastructure to quickly launch DApps. If you want to access other chains, BOBs hybrid L2 model can easily connect BOB and other public chain networks - and it is done under the security of the Bitcoin network.
BOBs hybrid Layer 2 aims to build a DeFi ecosystem that is fully secured by the underlying security of Bitcoin, helping to release the sleeping trillions of dollars of BTC liquidity, which are waiting for the right opportunity to earn returns. For Bitcoin holders, whether they are small retail investors or large institutional investors, to achieve this goal, they need the security of the Bitcoin network itself to protect it, and all this is thanks to BOBs hybrid Layer 2 model.
