BOB (“Build on Bitcoin”) has unveiled a new framework enabling bitcoin BTC$112,618.05 holders to borrow stablecoins against their BTC while keeping it secured on the Bitcoin network.
The Bitcoin Vault Liquidation Engine addresses some persistent challenges in bitcoin lending, such as all-or-nothing liquidations, and multi-day settlements, founder Alexei Zamyatin told CoinDesk in a Telegram message.
A vault, in the context of collateral and lending, is a smart contract that securely locks a user’s cryptocurrency as collateral for a loan.
It acts as a trustless escrow, automatically managing the collateral and executing a liquidation (selling the asset) if its value falls too low.
Applying this to bitcoin could transform the most secure and largest crypto asset into active collateral, unlocking trillions in BTC liquidity for use in the decentralized finance (DeFi) ecosystem without forcing holders to sell.
BOB’s new design supports partial liquidation, meaning an entire position does not need to be liquidated if it goes underwater; only enough collateral to restore loan health is liquidated.
The engine also allows liquidations to be completed in 10-60 minutes, rather than taking several days as can be the case within the mechanism of BitVM, the computing paradigm used by projects such as BOB to deploy smart contracts on Bitcoin.
The challenge is to create a smart contract-enable DeFi experience akin to what crypto users recognize on other chains like Ethereum.
By allowing lending protocols on any chain to use native BTC as collateral, BOB aims to extend the reach of Bitcoin-backed borrowing beyond wrapped assets like wBTC.
The team said the innovation could mobilize “billions in dormant Bitcoin liquidity,” connecting Bitcoin’s $2.2 trillion market with global on-chain credit systems and advancing the broader Bitcoin DeFi (BTCFi) movement.
BOB is one of a number of prominent projects in the BTCFi sector, aimed at unlocking BTC liquidity to power the broader blockchain-based finance ecosystem. Others include Bitcoin programability layer Hemi and BTC restaking protocol Babylon.
UPDATE (Oct. 28, 15:10 UTC): Adds final paragraph mentioning other prominent projects in BTCFi.
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