Abstract
This proposal defines eBTC: a trustless mechanism for moving Bitcoin (BTC) value onto Cardano as a native token, unlocking BTC liquidity for Cardano DeFi. Originally conceived as a one-way, burn-and-mint design, this CIP also explores a more advanced two-way approach using on-chain key management. The one-way approach involves burning BTC on the Bitcoin network, presenting cryptographic proofs (NIPoPoW/SPV) to a Cardano smart contract, and minting a corresponding amount of eBTC. The two-way extension allows redeeming BTC by carefully managing a unique Bitcoin wallet private key on-chain. Both approaches aim at allowing BTC to benefit from Cardano’s advanced smart contract functionalities.
Full draft proposal here: https://raw.githubusercontent.com/siran/CIPs/refs/heads/CPS-1856/CPS-1856/README.md
Comments welcome…
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Is a “one-way bridge” an established concept?
Not sure how the economics should work if you can’t bridge back.
I’d imagine a receiver saying something like: “Yeah, okay, nice that you have a proof that you burned some real Bitcoin for this, but what does that have to do with me. For me, those are just some arbitrary worthless Cardano Native Tokens someone invented.”
Okay, maybe not that hard. If the contract checks out, it at least effectively limits the supply of “eBTC” to the amount of BTC people are willing to burn for them, but still: Why and how should that have value?
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If you want Bitcoin involved in a smart contract without custodians this might be a way. It is a way of wrapping bitcoin in a trustless manner.
eBTC is only minted IF BTC was burned. So is like a transfer of value for those that understand the concept. Value is given by the holders, not by the observers.
Tokenomics is 1:1, so there shouldn’t be a problem with inflation or deflating btc.
Tokens are migrating from a legacy chain (bitcoin) to a smartchain (cardano). That justifies the one-way bridge. It’s a migration. For example, you can’t go back in time either. Progress is one-directional.
I understood that your idea is that BTC have been provably burnt 1:1 for eBTC. That’s not the problem.
All tokens, all currencies only have value because and if there is some future value that people believe in, in the case of real money that your society continues to use it, that you can buy your groceries or pay your rent with it, in the case of L1 coins that they can be exchanged for real money (hopefully more in the future), be used for whatever shenanigans are possible on that chain, and maybe in some utopian future that they are just as good for buying goods and services as real money, in the case of project tokens that they provide whatever utility the project has invented for them, that they gain value through buybacks or profit drops or whatever.
Just the proof that something else has been burnt is not enough. Scarcity alone is not worth anything. My poo is scarce, I only produce a very limited amount per day, but it doesn’t have any value whatsoever.
Wrapped/bridged tokens can (more or less, depending on the trust in the bridge) “inherit” the value of the original token/coin because of the believable promise that you can always change back to that original. Stable coins are very similar in that regard, both the fiat-backed ones that promise that you can change to the real thing as well as the algorithmic ones that promise that you can always convert to the then current equivalent in whatever is used as the base coin.
Projects can migrate their tokens one way – like WMT to WMTx – with a “burn and issue” mechanism because they can unilaterally decide that they will only give their utility to the new, migrated token in the future. Nation states can migrate with 1:1 exchange processes (or other exchange rates) in currency reforms because they have the authority to decide that the new currency is the currency in the future.
So, why should eBTC inherit the value of BTC if I can’t change it back? Why should projects accept it? What benefit do they have from the fact that someone else burned real BTC with whatever value it had at that moment in the past?
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Definitely interesting points.
eBTC as a concept can exist also in other smart chains like ethereum’s.
the value of the eBTC is given by the person who decided to burn BTC because the eBTC for whatever reason allowed him to accomplish his desires.
eBTC being in the Cardano chain could be converted for ADA (in a dex?), then sold for fiat.
but who would do that? eBTC would inherit BTC’s value for the owner fo the BTC.
that said, I kept thinking in the idea. a two-way trustless bridge in possible:
Conclusion
A fully on-chain, two-way BTC–Cardano bridge is feasible if the smart contract:
- Generates a unique BTC address and stores its private key in encrypted form.
- Mints eBTC after verifying that BTC has been locked.
- Only reveals or uses the Bitcoin private key to sign the redemption transaction once eBTC is burned.
(updated the proposal, link above)
ideas welcome
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