A Trustless Bitcoin for Polkadot's DeFi Ecosystem
The BTC-Parachain allows users to mint 1:1 Bitcoin-backed assets onto Polkadot - PolkaBTC - and use these across a wide range of applications, including decentralized exchanges, stablecoins, and lending protocols.
In 2016, the Polkadot whitepaper identified secure interoperability with Bitcoin as a critical and also challenging feature. In January 2020, with the launch of Polkadot on the horizon, the Web3 Foundation commissioned Interlay to design a trustless bridge from Bitcoin to Polkadot based on XCLAIM — a carefully designed, open and trustless system that guarantees the security of user’s funds.
The Interlay team is building a customized Substrate environment for PolkaBTC, optimized to verify Bitcoin payments. The BTC Parachain includes a Bitcoin cross-chain SPV client (BTC-Relay), integrations with secure price oracles and XCMP, as well as support for hardware wallets. In addition, Interlay is also building client software for Vaults, Staked Relayers (who make sure BTC-Relay is up to date), as well as an easy-to-use web interface.
A first Alpha testnet has been successfully running since November 2020 and a feature-ready Beta testnet will be launched in mid-February 2021. Once the audit of the code base is completed in February 2021 and parachains are enabled on Polkadot and Kusama, the BTC Parachain will go live: most likely, first on Kusama, then on Polkadot mainnet.
Key Features and Highlights
What makes the BTC-Parachain unique is the strict dedication to being trustless and decentralized:
-Trustless. The bridge has no central authority. Right from the start, the BTC-Parachain will be run by a decentralized network of individuals, community members, and companies.
-Decentralized. In the spirit of permissionless systems like Bitcoin, anyone can participate in operating the bridge: contrary to other approaches, you do not need permission or any additional token to become a maintainer and start earning fees.
As a holder of PolkaBTC, you have the following guarantee:
"You can always redeem PolkaBTC for BTC, or be reimbursed in the collateral currency at a beneficial rate."
In the case that a vault misbehaves, you will be reimbursed from the Vault’s collateral and will make a very profitable trade between BTC and DOT. At launch, collateral will be put down in DOT. In the mid/long run, this may be extended to stablecoins or token-sets to improve stability.
Summarizing, to trust the bridge, you only need to:
- Trust that Bitcoin is secure. Meaning: trust that Bitcoin blocks are final after X confirmations. The bridge will recommend a minimum of 6 confirmations, though users and apps are encouraged to set higher thresholds.
- Trust that Polkadot is secure. This assumption is made by all applications running on top of Polkadot.
Read more about PolkaBTC on polkabtc.io
Alexei Zamyatin - Founder & CEO
Dominik Harz - Founder & CTO.