dlcBTC is a non-custodial representation of Bitcoin on Ethereum, enabling Bitcoin holders to participate in DeFi protocols while retaining full ownership of their assets. It employs Discreet Log Contracts (DLCs) to lock Bitcoin in a multisig UTXO, with one key held by the user and the other distributed across a decentralized network.
How dlcBTC Works
Locking BTC: Users lock their BTC into a DLC using DLC.Link's bridge. This process mints dlcBTC tokens equivalent to the amount of BTC locked.
DLC Mechanism: A DLC acts as a lockbox via a "contract" on the Bitcoin blockchain, taking the form of a pre-signed agreement of possible transaction outcomes between the user and the protocol.
Key Distribution: Users hold one key to the multisig UTXO, and the second is distributed among the attestor nodes. The DLC can only be liquidated back to the user, safeguarding against theft or loss.
Attestor Layer: A network of seven trusted node operators monitor blockchain events, accept DLC creations, and validate EVM blockchain outcomes. They support the bridge by ensuring reliable cross-chain communication without holding users' keys or having custodial ownership of the locked funds.
Using dlcBTC: Minted dlcBTC tokens can be employed as collateral within various DeFi platforms, such as Curve and AAVE.
