Abstract

Bitcoin holds over $1 trillion in value yet participates in almost none of the decentralized finance ecosystem. The dominant narrative — "digital gold" — has kept BTC inert while every other major asset has found productive use on-chain.

OXO Protocol is a Layer-1.5 infrastructure built on Ethereum that bridges Bitcoin into BTC-backed DeFi around oxoBTC. L1.5 is OXO's internal architecture term for coordinating Bitcoin-backed liquidity with EVM execution. Users deposit BTC and receive oxoBTC, a 1:1 backed on-chain representation that can be swapped, lent, staked, or used in swap and Bitcoin exit flows during the protocol roadmap - all while redeemable for real BTC through the Phase 1 OXO bridge redemption flow.

The protocol is in early access / pre-public testnet and is an audit candidate built in public. Sepolia components may exist for internal review, and public participation opens later through the waitlist. Mainnet launch will follow public testnet, third-party audit, final ZK/security review, and deployment validation. No arbitrary deadline - security first.

The Bitcoin Problem

Digital Gold, Frozen in Place

Bitcoin was designed to be peer-to-peer electronic cash. In practice, the vast majority of BTC sits idle in wallets — appreciated in value but generating no yield, participating in no protocol, and spending no fees back into any ecosystem. The Lightning Network addressed micropayments but did not solve DeFi participation.

Existing Solutions Fall Short

The Missing Layer

Ethereum has its DeFi layer. Bitcoin - the largest crypto asset by market cap — has no native, fully integrated DeFi and payments layer. OXO is being built as an early BTC-backed DeFi layer focused on oxoBTC utility, treasury-routed yield, and controlled Bitcoin redemption flows.

The OXO Solution

The Ecosystem Loop

Once a user bridges BTC into OXO Protocol, they enter a BTC-backed financial ecosystem. They can stay entirely within OXO, use configured EVM modules, and request a return to BTC through the OXO bridge. Future cross-chain transfers of oxoBTC are planned, while BTC redemption remains through the OXO bridge path. The protocol is designed so that OXO is the primary entry and redeem path for Bitcoin liquidity.

Key Design Principles

• EVM-side self-custody with explicit BTC custody. Users hold oxoBTC directly on EVM. BTC reserves are managed by a 3-of-5 multisig bridge custody model in Phase 1, with later roadmap custody upgrades targeted to reduce custody assumptions.
• OXO as the redeem path. Future cross-chain transfers of oxoBTC are planned, while BTC redemption remains through the OXO bridge path and Phase 1 relayer settlement.
• Protocol fee yield. By depositing oxoBTC into staking or staking OXO, users can earn configured rewards and protocol fee revenue where treasury routing is enabled.

Protocol Architecture

oxoBTC Token

oxoBTC is an ERC-20 token with 8 decimal places (matching Bitcoin's satoshi precision). oxoBTC is designed as a 1:1 BTC-backed representation, with BTC reserves held under the Phase 1 bridge custody model. The token is minted exclusively by BridgeV3 upon signer-attested deposit and burned when a redeem request is created.

BridgeV3

The bridge operates as a relayer + 3-of-5 signer-attested mint system. When a user sends BTC to the protocol deposit address, an off-chain relayer detects the confirmed transaction, collects signer attestations, and submits it to mintAndTransfer(). Replay attacks are prevented via unique deposit IDs stored on-chain.

A 0.1% bridge fee is charged on every mint and routed to the Protocol Treasury, which distributes it to stakers (70%), POL (20%), reserve (5%), and OXO buyback-burn (5%).

ZK Rollup

The OXO ZK Rollup component is under active testnet development. Production-grade ZK security requires the final circuit, proving key, generated verifier, and public input binding before it should secure real value.

Core Modules

Protocol Fee Flow

Configured protocol fees route through ProtocolTreasury and use the 70% stakers / 20% POL / 5% reserve / 5% buyback-burn split. Bridge deposit fees, configured lending interest share, and configured FlashExit fees are protocol revenue. AMM swap fees remain LP revenue unless a protocol fee switch is explicitly added.

Tokenomics

Architecture & Value Capture

The exact supply, emission schedules, and distribution percentages are currently undergoing rigorous optimization and will be published closer to the Mainnet Genesis event. OXO Protocol is committed to a community-first distribution model.

Dual-Token Ecosystem

OXO Value Drivers

OXO Utility

Security Model

Bridge Custody

Phase 1 (current): 3-of-5 multisig relayer. Five independent key holders must co-sign any mint operation. This reduces single-signer risk while retaining explicit Phase 1 custody assumptions.

Phase 2 (roadmap): Roadmap custody upgrade research — a cryptographic protocol where the private key is never assembled in one place. This is intended to reduce custody assumptions while maintaining operational speed.

Smart Contract Security

All core contracts use OpenZeppelin v5 audited libraries. Specific protections include:

Liquidity Bootstrapping

OXO Protocol plans to address the cold-start problem through a phased, protocol-owned liquidity (POL) strategy rather than relying solely on external LPs.

Audit Plan

Pre-mainnet, OXO Protocol will run third-party security review, including smart contract audit and final ZK circuit/security review. Any public contest scope and reward pool will be confirmed before launch.

Roadmap

The Path to L1.5

OXO Protocol development follows a strict milestone-driven approach, prioritizing security and architectural robustness over arbitrary deadlines.

Contracts Under Review (Pre-Public Testnet)