Summary
Based on our comprehensive analysis of BOB network, we have identified several promising aspects of its ecosystem, particularly its integration with Bitcoin and robust technical infrastructure. However, the ecosystem is still at a very early stage - currently in Phase 1 of its development roadmap - as evidenced by its very low stablecoin TVL (1.2% of total TVL). This significantly undermines its stablecoin borrowing use case, and also creates substantial challenges for liquidators who need to atomically sell BTC-like collateral for stablecoins.
As an optimistic rollup built on the OP stack, BOB benefits from robust security features, including multiple audits and a $250k bug bounty program. But critical security concerns remain: the fraud-proof system is not public, network operations remain centralized, and there is no timelock mechanism to restrict critical contract upgrades. These security assurances fall short compared to other OP chains like Base or Optimism mainnet.
The potential deployment of GHO on BOB presents a unique opportunity to establish Aave as the leading stablecoin issuer for BTC-backed borrowing. However, given the current security and centralization concerns, we recommend deferring GHO facilitator deployment until these fundamental issues are addressed.
BOB hosts a significant bridged BTC TVL of $250M, with untapped Bitcoin liquidity offering substantial growth potential. Accordingly, we support @ChaosLabs’ recommendation to onboard tBTC, WBTC, and LBTC, alongside a BTC-correlated E-mode where LBTC serves as the sole collateral. Since LBTC is not yet yield-bearing, this would primarily enable additional point farming through leveraged-looping. SolvBTC.BNN, a yield-bearing BTC derivative, stands out as the next strong candidate for onboarding as collateral but would require a separate risk assessment.
BOB Network Qualification
1. Network Fundamental Characteristics
1.1 Network Overview
Architecture
As detailed in the roadmap, the launch will occur in three phases. Phase 1, now completed, involved establishing BOB as an Ethereum L2 using the OP Stack based on the optimistic rollup architecture. An optimistic rollup relies on three key components: the Sequencer, the Proposer, and the Challenger. The SequencerSequencer manages a mempool of pending transactions, determines their order for the next block, and can potentially extract MEV from users. The Proposer advances the EVM state by processing the next set of transactions and submitting updated state roots to the DA layer (in BOB’s case, utilizing Ethereum EIP-4844 blobs). Lastly, the Challenger safeguards funds by disputing invalid state roots in the rollup contract on Ethereum, ensuring deposits cannot be stolen.
Generalized rollup architecture. Source: Expresso Network documentation, January 8th, 2025
In Phase 2, BOB will implement a BitVM bridge to Bitcoin, a trust-minimized bridge where a single honest node suffices (1-of-n). Using Bitcoin’s finality as a “soft” source of economic security, which is exponentially more secure over time, the BitVM bridge becomes as hard to attack as Bitcoin. In phase 2, Ethereum will continue to secure the Ethereum bridge. However, Bitcoin’s “soft” finality will allow a reduced withdrawal delay of a few minutes instead of 7 days.
Phase 2. Source: BOB documentation, January 8th, 2025
Phase 3 will bring full Bitcoin finality by posting BOB state transition proofs to the Bitcoin chain, removing Ethereum’s need. An ideal scenario would be to enable ZK support on Bitcoin through a hard fork, but leveraging optimistic verification through BitVM is more likely. Optimistic verification will be very costly as it will require state proof to be posted to the Bitcoin chain at regular intervals — it will, therefore, need to be funded by significant revenue from BOB’s activity.
Phase 3. Source: BOB documentation, January 8th, 2025
Security
Because BOB currently relies on the Optimistic rollup stack, it benefits from security guarantees similar to the Optimism Mainnet network. Since October 2020, more than 20 audits have been performed on the different components of the Optimism codebase from recognized auditors like OpenZeppelin and SigmaPrime. The code base for BOB is open source on Github, displaying consistent contributions over time.
Git commits over time. Source: Github insights, January 8th, 2025
There are a few differences between the Optimism rollup stack and the BOB code base, and we note that no audit has been performed on the BOB code base itself. However, all official bridges of BOB have been audited. The Bitcoin bridge, also called BOB Gateway, has received the following audits:
- Cure53 (April 2024): 3 low risks and 1 medium risk findings.
- CommonPrefix (April 2024): 4 low risks and 1 medium risk findings.
- Pashov (April 2024): 5 medium risks and 5 low risks findings
- Pashov (August 2024): 7 low risks findings.
- Pashov (September 2024): 6 low risks findings.
The USDC bridge has also received two audits:
- Cure53 (April 2024): 1 high risk and 1 low risk findings. The high risk is related to the front-running of a non-atomic contract initialization, an easily fixed issue.
- Pashov (April 2024): 1 low-risk finding.
A $250k bug bounty is available on remedy.xyz since August 7th, 2024, which amounts to around 1% of BOB’s TVL.
1.2 Decentralization and Legal Evaluation
Decentralization
BOB currently uses Ethereum EIP-4844 blobs as its DA layer and, therefore, benefits from the full DA security of Ethereum. Although anyone can run a BOB node, only the BOB protocol can operate the network. In this blog post dated March 11th, 2022, the Optimism team outlined its plan to decentralize its architecture over time. Since then, Optimism mainnet has reached Stage 1 in L2beat’s classification. Although BOB is based on the same rollup stack, it is still at Stage 0 for the following reasons:
- The fraud-proof system is not public: only the Proposer and Challenger, which are permissioned roles, can propose state roots and challenge invalid state roots, respectively. Funds could be stolen if an invalid state root is not challenged after 7 days.
- A Timelock does not slow down contract upgrades. A malicious upgrade could steal funds instantly.
- Centralized operation of the chain services by the team could result in halted operations and frozen funds.
- Centralized operation of the chain services could result in the front running of L2 transactions and the extraction of MEV.
That being said, it is publicly known that BOB plans to transition to Bitcoin’s finality for its economic security through the use of an 1-of-n BitVM bridge instead of relying on further development of the Optimism rollup stack.
Access control
All OP stack chains, including Base and Optimism Mainnet, include privileged roles that can perform important actions to maintain the availability and security of the chain through time. As the technology behind the OP stack matures, optimistic rollup rollup will become more and more decentralized.
Here are the main controlling wallets of the BOB network:
Apart from 1 signer, Multisig A and Multisig B have the same signers. We note an official Safe UI and factory smart contract.
BOB operates through various off-chain services:
- Batcher post batches of transactions as EIP-4844 blobs through EOA A.
- Proposer submits proposals to the L2OutputOracle through EOA B.
- Challenger can challenge state proposals made by the Proposer. It creates a multisig transaction for Multisig A that the signers must then validate.
- Guardian can pause withdrawals on BOB. It is assigned to Multisig A.
Here are the main contracts and their owners in BOB:
- L1 Proxy Admin: can upgrade most L1 contracts related to BOB. It is owned by Multisig A
- L2 Proxy Admin: can upgrade most L2 contracts related to BOB. It is owned by Multisig B.
- SystemConfig: controls important parameters related to the L2 execution layer. It is owned by Multisig A.
- L2OutputOracle: receives BOB state proposals from the Proposer, which allows for the processing of withdrawal requests after 7 days. State proposals can be challenged by the Challenger.
All privileged roles and wallets are listed in the BOB documentation, including mitigation strategies in case the listed wallets become compromised. We noticed the lack of a Timelock on both L1 and L2, which would allow BOB users to exit the chain in case of a malicious takeover.
Legal evaluation
The Bob Foundation, a Cayman foundation company, operates the interface hosted at https://app.gobob.xyz/. The interface displays data and provides tools and functionalities that enable users to interact with the BOB protocol, such as accessing BOB bridge(s). However, it is expressly stated that the BOB protocol, including its bridging smart contracts, is not a service the Bob Foundation provides. Terms of Service emphasize that the Foundation does not exert control over all activities and data within the protocol nor does it take possession, custody, or control of any digital assets interacting with the protocol.
While the Bob Foundation asserts a degree of separation from the protocol, it can monitor on-chain activities. Such monitoring is performed to ensure compliance with the Terms of Service and applicable laws and address legal obligations. Ongoing monitoring is justified by the eligibility conditions outlined in Section 1.5 ToS, which prohibit website use by any person or entity classified as a “Prohibited Person”. The prohibitive classification encompasses individuals or entities subject to economic or trade sanctions, located, resident, or organized in jurisdictions under comprehensive country-wide or regional sanctions or identified as “terrorist supporting” by the United Nations, European Union, United Kingdom, or United States.
Regulatory uncertainty remains a significant consideration due to the absence of definitive frameworks governing layer-two solutions in the Cayman Islands and globally. If the protocol facilitates transactions involving or interacting with the swapping of digital assets, regulators could assert that it operates as a money transmitter or a crypto-asset service provider, thereby requiring licensing in certain jurisdictions. Similarly, should the protocol offer mechanisms for staking or other economic incentives, there is a potential risk that such activities could be classified as an unregistered securities offering, depending on the applicable jurisdictional laws and regulatory interpretations.
These regulatory risks, while present, can be effectively mitigated through the evolution of the protocol and proactive engagement with legal and compliance experts. As of the date of this assessment, we have confirmed the presence of necessary legal disclaimers and a clear articulation of binding user terms.
1.3 Activity Benchmarks
Chain TVL over time. Source: DefiLlama.com, January 8th, 2025
From May 2024 to October 2024, BOB’s TVL has hovered around $50m. It then skyrocketed to $250m and recently retraced back to $200m.
Chain TPS over time. Source: Dune.com, January 8th, 2025
BOB’s onchain activity has been relatively stable, with approximately 0.75 TPS since launch, with some heightened periods of activity here and there. It is important to note that the OP rollup stack that BOB uses allows for significantly higher TPS rates if needed, meaning it can scale as is.
Daily unique users. Source: Dune.com, January 8th, 2025
The count of active unique users per day indicates a relatively stable activity level that is slowly increasing. We noticed a peak of activity on December 4th, 2024, with nearly 60,000 unique users that day.
As a chain primarily dedicated to using BTC derivatives in DeFi, BOB’s TVL is mostly made of those BTC derivatives. As stablecoins are the main debt asset used together with BTC-like collaterals, it is interesting to look at the top 3 stablecoins by TVL on BOB:
- USDT: $1.94m or 0.63% of BOB’s TVL
- USDC: $1.8m or 0.55% of BOB’s TVL
- satUSD: $246k or 0.06% of BOB’s TVL
The stablecoin concentration in BOB is very low, at 1.2% of the total TVL, indicating an early-stage DeFi environment.
2. Network Market Outlook
2.1 Market Infrastructure
Bridge
BOB maintains two official bridges: one for Bitcoin, the Bitcoin Gateway, and one for Ethereum. In addition, BOB integrates with several third-party bridges whose security is not guaranteed by BOB. All bridges are accessible on the app.gobob.xyz dApp. Third-party bridges include:
- Major Ethereum chains (Ethereum itself, Arbitrum, Base, Optimism, Polygon, …)
- Moonbeam (part of Polkadot ecosystem)
- Bitlayer (Bitcoin layer 2 scaling solution)
- Merlin (Bitcoin layer 2 scaling solution)
- BNB Smart Chain
Bitcoin intent process. Source: BOB blog post, January 8th, 2025
In addition, users can bridge and stake their Bitcoin on BOB in a single Bitcoin transaction through the Bitcoin Gateway bridge thanks to Bitcoin intents. Bitcoin intents allow for executing arbitrary transactions on an EVM (here, BOB) by making a single transaction on Bitcoin thanks to a network of competing executors on the EVM called solvers.
Lending
A few lending protocols are deployed on BOB:
Although not exactly a lending protocol, Satoshi Protocol allows minting the satUSD stablecoin using various BTC-derivatives on BOB — however, that stablecoin’s TVL remains very limited at $212k.
DEXs
- OkuTrade with $50.47m of TVL, gives access to UniswapV3 pools on BOB together with the Oku aggregator frontend.
- Izumi Finance with $821k TVL.
The Velar Artha PerpDEX is also deployed on BOB and allows trading the WBTC/USDT pair only with up to 10x leverage.
CEXs
BOB is currently supported by Binance and OKX together with the OKX wallet.
Oracles
Several oracles are available on BOB:
The BOB team has also expressed their plan to deploy Chainlink price feeds should Aave be deployed on BOB. Should Aave be deployed on BOB, we recommend using those Chainlink oracles.
2.2 Liquidity Landscape
Most liquid assets
We look at the liquidity available for BTC derivatives in OkuTrade, the main liquidity venues on BOB, since the Izumi Finance DEX has 50x less TVL:
- uniBTC: $19.63m of liquidity (48% of chain deposits)
- SolvBTC.BBN: $15.37m of liquidity (12.3% of chain deposits)
- WBTC: $6.59m of liquidity (18% of chain deposits)
- tBTC: $4.23m of liquidity (54% of chain deposits)
- SolvBTC: $1.82m of liquidity (5% of chain deposits)
- LBTC: $1.15m of liquidity (97% of chain deposits)
SolvBTC is a unified Bitcoin wrapper for other bridged BTC assets like WBTC, uniBTC, tBTC, or LBTC. Once wrapped, it can be restaked into the Babylon protocol to obtain SolvBTC.BBN, a yield-bearing BTC derivative. As of January 8th, 2025, SolvBTC.BBN represents the only yield-bearing Bitcoin derivatives, as LBTC is yet to activate the distribution of Babylon rewards to token holders.
We note that the OkuTrade website is largely non-functional, with frequent errors returned by the backend when trying to get quotes for swap.
Incentive programs
The BOB Fusion Program offers points called spice as a reward for various onchain activities. Multiple “special events” are advertised as part of it: for each, a fixed quantity of spice points are set to be distributed to participants up to a specific target market cap. As of December 28th, 2024, special event #4 — called Climbing the ranks — is live with a $226m TVL achieved out of the $300m target. The use of Babylon LSTs on BOB is a cornerstone of this incentive program, outlying the positive synergies between the two protocols.
Fee structure
As an Ethereum optimistic rollup, BOB uses ETH as a gas token to pay for transactions. Transaction fees are made of two different fees: the execution fee and the L1 data fee. The execution fee is similar to what one would pay for a transaction on Ethereum, but it is way lower and is equal to the amount of gas used multiplied by the gas price. The L1 data fee is paid to the SequencerSequencer for the cost of including the transaction into an EIP-4844 Ethereum L1 blob. Since the BOB team is currently the only one allowed to operate the Sequencer and Proposer services, all execution fees are presently being sent to a wallet controlled by the BOB team.
Application developers on BOB can use BTC derivatives as a gas token through Meta Transactions and Account Abtractions if they want to. When a user deposits BTC into BOB through the official BOB bridge, the platform will offer to convert part of the deposited BTC into ETH to help send its first transactions on BOB.
2.3 Ecosystem Resilience
Grant program
There is no publicly advertised grant program for app developers or projects related to the BOB ecosystem.
Partnerships
BOB’s main partnership is with Babylon protocol, a Bitcoin staking primitive allowing BTC on various PoS chains. This is exemplified by the special point reward programs outlined in this blog post, allowing users to accumulate both Babylon and Spice points by using Babylon-based LSTs on BOB.
Liquidity depth
As seen in section 2.2, there is a meaningful amount of liquidity for the BTC wrappers and derivatives found on BOB. However, the liquidity is mostly found between them and is correlated. Both total stablecoin TVL on BOB amount to almost $4m, and their liquidity is very low. This can be explained by the fact that DeFi on BOB is still nascent, with few assets and DeFi opportunities available on the chain apart from the bridging and staking of BTC wrappers.
Top-5 liquidity pool by TVL. Source: OkuTrade, January 8th, 2025
This lack of stablecoin liquidity is an issue regarding Aave’s main projected use case on BOB, namely, borrowing stables against BTC wrappers and derivatives. Liquidators would still have the option to swap the collateral for another BTC-like asset on BOB before bridging over to another chain — like Ethereum — where the collateral would be sold for stables. However, this implies a non-atomic liquidation process, which is riskier and impractical for liquidators.
2.4 Ecosystem Growth Potential
We estimate that the share of BTC bridged over Defi-enabled chains, like BOB, is less than 2% of the total BTC supply. WBTC, the largest Defi-enabled BTC wrapper, presently represents 1.1% of the Bitcoin total supply, while the second largest BTC wrapper, cbBTC, represents 0.14% of the total supply. Therefore, the remaining share of idle BTC is untapped liquidity for a platform like BOB, representing a significant growth opportunity.
By integrating with other networks, BOB can act as an intermediate for Bitcoin liquidity to be used in Defi applications on those networks, which might be more mature. This might work against BOB’s goal of hosting a full-fledged Defi ecosystem. For now, BOB’s strategy is open to the two possibilities thanks to both its Bitcoin native bridge and its Ethereum native bridge.
2.5 Major and Native Asset Outlook
Main asset TVL. Source: Dune.com
The biggest assets on BOB are BTC wrappers and derivatives. SolvBTC.BBN leads the way with $140m of TVL, which is close to 55% of BOB’s overall TVL. We note the relatively small amount of stablecoins on BOB, estimated at $3.9m.
2.6 Tokenomics
BOB does not have a governance token or a DAO at this time. There is no publicly disclosed plan to have a governance token or a DAO in the future.
3. Onchain discoverability
Activity dashboards for BOB are available on TokenTerminal and DefiLlama. No subgraph for BOB is available on TheGraph, but some are available on GoldSky, and the chain can be indexed on SQD. The team maintains two Dune dashboards:
The official blockchain explorer for BOB, based on the opensource Blockscout codebase, is maintained by the team.
4. Impact of Aave Deployment
The primary value proposition for Aave’s deployment on BOB would be enabling users to borrow stablecoins against BTC-based collateral assets. However, the current stablecoin liquidity on BOB (approximately $4M) is notably insufficient compared to its total TVL ($252M), presenting a significant challenge. While Aave’s presence would likely attract more stablecoin liquidity to BOB, additional liquidity incentives may be necessary to achieve meaningful depth.
Deploying a GHO facilitator on BOB to establish Aave as the primary stablecoin issuer merits consideration. However, several critical security concerns must be addressed before such an implementation:
- The non-public nature of the fraud-proof system could compromise the ability to challenge malicious withdrawal requests
- The centralization of Proposer and Sequencer services under BOB’s team introduces operational risks, including potential fund freezes
- The absence of timelock mechanisms for both L1 and L2 contract upgrades exposes bridge funds to elevated risks and could result in bad debt for Aave
Given these security considerations, we recommend deferring the deployment of a GHO facilitator until more robust security guarantees are implemented.
5.1 Initial Asset Selection
Our assessment for initial asset selection considers three primary criteria:
- Previous successful integration and risk review within the Aave ecosystem
- Asset TVL on BOB
- Available liquidity relative to total asset TVL
We support @ChaosLabs’ recommendation to onboard tBTC, WBTC, and LBTC, along with a BTC-correlated E-Mode where LBTC serves as the sole collateral. It is worth noting that Lombard has not yet activated the distribution of Babylon staking yield to LBTC holders. As a result, leveraging LBTC as collateral in a looping position would primarily enable additional point farming. Being a yield-bearing BTC derivative, SolvBTC.BNN is also a strong candidate for collateral but would require a separate risk assessment.
Given the limited stablecoin liquidity on BOB, we do not recommend onboarding any stablecoin at this time. A GHO facilitator could be considered once the BOB network demonstrates stronger security guarantees.
5.2 Asset parameters
To follow
Disclaimer
This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.
Change log:
Jan 13th: Updated recommendation to support the leveraged BTC LST use case
