BOB: Aiming for a merge between bitcoin and ethereum.

Since 2023 we have seen a lot of innovation building on bitcoin, including Ordinals and Layer 2 solutions like Stacks leveraging the BRC-20 framework, as well as Runes leveraging the UTXO model to enable tokens on bitcoin. Today we are looking at yet another contender for expanding bitcoin that is backed by Coinbase Ventures among other major VCs, and therefore worth taking a closer look at. 

Bitcoin is a powerhouse of security, yet intentionally constrained in its scripting language, and ethereum is a developer's haven, bustling with innovation but also limited by transaction cost and speed despite its move to proof of stake. What if there was a bridge, not merely between these blockchains but between their core strengths? Enter BOB (Build on Bitcoin).

BOB is a new Layer 2 scaling solution built on top of bitcoin. It aims to bring greater functionality and smart contract capabilities to the bitcoin network. BOB's core innovation is its focus on incorporating the Ethereum Virtual Machine (EVM): It creates a bridge between bitcoin and ethereum, enabling potential asset flows and interaction between the two blockchains. This opens the door for developers accustomed to the ethereum ecosystem to build applications on bitcoin using familiar tools.

I. How it works.

BOB primarily functions as a rollup. A rollup is a Layer 2 system that processes transactions off-chain to save the computational load of the Layer 1 blockchain. This means BOB bundles transactions off bitcoin's main chain (Layer 1) and processes them in batches. Then, it settles these processed batches and later settles back onto bitcoin for security in a compressed manner for finality and increased efficiency, as well as cheaper transactions. Bitcoin's scripting capabilities are intentionally limited for security purposes. BOB aims to address this by enabling complex smart contracts and broadening bitcoin's use cases into areas like DeFi and NFTs. Most developers are accustomed to EVM, so BOB enables developers to use the same Solidity smart contract language and toolsets they use in the ethereum ecosystem. This way, existing ethereum-based applications might be easily ported or adapted to run on BOB.

II. Roadmap and development stage.

Introducing a merged mining concept in bitcoin establishes a threshold between phases 1 and 2. This mechanism leverages the established security of the Layer-1 chain (in this case, bitcoin) to fortify the auxiliary chain, making it harder to attack. During this process, while the parent chain undergoes proof-of-work (POW) mining, the auxiliary chain (Layer-2 deployed by BOB) validates the submitted work. If the solution is valid for both chains, the POW miners can earn an additional reward for supporting the auxiliary chain.

Source: BOB Website

BOB is currently in phase 1 and has recently launched its mainnet. 

In phase 1, settlement happens on ethereum, deploying an optimistic ETH rollup using the OP (Optimism) stack. An optimistic rollup assumes all transactions are valid but are challengeable. BOB features a native L1/L2 bridge with access to various assets, including stablecoins (USDT, USDC), ETH/stETH, and ERC20 tokens. Additionally, BOB tracks the state of bitcoin via a light client, enabling trustless cross-chain swaps, auctions, and contract execution.

Bitcoin assets (BTC, Ordinals, BRC20s) are bridged to BOB using a combination of trust-minimized and trusted bridges.

III. BOB’s evolution.

In phase 2, the implementation evolves to integrate both the bitcoin proof-of-work (PoW) security and the ethereum optimistic rollup structure. This implementation is a technique called "merged mining" that allows bitcoin miners to validate the state of the BOB rollup. If the state transitions are valid, miners only include BOB rollup state commitments in their blocks.

This action dramatically reduces trust in sequencers (who initially order transactions on the rollup) since miners act as an additional layer of validation and leverage bitcoin's robust security model for added protection.

Source: BOB documentation

Phase 3 consists of BOB's transition to using Bitcoin as its primary settlement layer while keeping a connection to Ethereum. The underlying mechanism is the BitVM, which allows fraud proofs to be encoded within Bitcoin scripts without needing changes to the Bitcoin protocol itself. 

In this phase is fundamental the use of BitVM as a two ways bridge, which enables asset movement between bitcoin and BOB, using light clients on both sides for trustless operation the creation of a light client or a simplified representation of BOB within the BitVM, allowing for on-chain proofs. This is about expanding the BitVM features to handle the bridge structure and validate the BOB rollup (potentially implementing ZK-rollup for efficiency and scalability).

Deploying ZK-rollups through BOB in the Bitcoin network is an intricate matter. ZK-rollups wrap transactions off-chain and create a proof (SNARK) that verifies their validity. Once submitted to Layer 1, the data usage for proof verification is reduced. The interaction with Layer 1 is through two smart contracts: one that holds the rollup data and the other that verifies the ZK proofs. 

At this stage bitcoin becomes the base security layer for BOB, providing maximum decentralization for bitcoin-based assets, and ethereum assets retain ethereum's full functionality. Finally, in phase 4, there is a potential for greater efficiency and scalability through ZK-proofs.

IV. Final thoughts.

Let’s go back to building on bitcoin-basics: Ordinals. They are a version of NFTs that exist on bitcoin. They are simple, they are indelible, they need ethereum just as little as ethereum NFTs need bitcoin. It is not obvious to us why we need to win over ethereum developers (and bring ethereum’s massive complexity) to build on bitcoin. Similarly with Runes: This simple protocol for launching tokens on bitcoin drew so much interest in a short time it led to a $2.6 million block. No need for solidity or ethereum developers coming over. 

The intricate ways BOB wants to use optimistic ethereum roll-ups while having bitcoin miners provide additional security via merged mining seems unnecessary… We might be wron, but if there is a good model to leverage bitcoin’s security to develop smart contracts and allow cheap transactions using BTC for “gas” then there will be developers, and in our opinion there is no need for winning ethereum developers over. And if I want to use my bitcoin on ethereum without a CEX I’ll just swap it to WBTC using Thorchain and don’t try to rebuild ethereum on bitcoin.

Ambitious ideas to expand on bitcoin are receiving funding, i.e. market validation, and BOB may just be the solution to marrying the distinct security models and philosophies of bitcoin and ethereum. But this is no easy task, and a clear red flag is the complexity of the protocol.