introduction

As an early holder and staunch supporter of BTC, Bixin Ventures has always been committed to the BTC ecosystem. We believe that BTC assets should play a greater role in excellent DeFi protocols on various chains and gain more benefits. Therefore, an efficient cross-chain bridge is necessary, so we invested in DLC.link early last year.

With the rise of inscription assets and the expansion of the Bitcoin data flow network, Bitcoin applications have increased. Faced with its limited native intelligencecontractfunctionality, Bixin Ventures sees DLC.Link as an innovative solution. After FTX collapse, the market is in dire needSafety, a decentralized alternative to Bitcoin. DLC.Link aligns with our vision and is committed to buildingSafety, trustless ecosystem, and promote the application of Bitcoin in various scenarios.

DLC.Link technical analysis

How DLC technology uses Schnorr signatures in Taproot upgrades

比特币在Taproot升级引入了Schnorr签名，这是一种比ECDSA更为安全的替代方案，用于创建和验证密钥。Schnorr签名具有线性特性，它可以通过结合公钥和签名有效地一次验证多个交易[1]。谨慎日志合约 (DLC) 充分利用了Tarproot中已经实现的Schnorr和PTLC技术。因为这两项技术已经是比特币网络的原生功能，所以在使用DLC时，无需依赖L2or side chain. On the contrary, DLC technology is protected by the computing power of the entire Bitcoin network, making it more secure and reliable.

In scenarios where DLC technology is used for lending, we usually use Schnorr signatures to handle conditional results. In this process, both parties each generate a unique key, combine it with their respective long-term keys to form a "public key", and prepare signatures corresponding to each potential outcome in advance, such as repayment or liquidation. Next, a decentralized network of witnesses confirms real-world results through discreet log numbers, unlocking pre-prepared signatures toBlockchainTrigger contract execution[2]. This demonstrates the universality, flexibility and safety of DLC technology in practical applications.

How DLC technology secures Bitcoin on-chain without validators

The Discreet Log Contract (DLC) no longer requires an external verifier, but directly inherits the security of Bitcoin to ensure on-chain security [2]. In the DLC.Link architecture, the witness network is an innovative design. As witnesses of off-chain services, they use smart contracts toXiaobai NavigationActively monitorBlockchain，以JSON的格式公开宣布DLC事件。从数据源（另一个区块链上的智能合约）获取对应的结果后，见证者对其进行证明并签署。为增强安全性，DLC.Link采用了5-of-7的见证者多签，降低了见证者和合约一方的共谋风险。DLC.Link管理合约会随机选取白名单中的无需信任的见证者[3]。设计上还允许第三方，组织运行见证者节点，从而愈加促进去中心化。去中心化见证者网络避免了单点故障，有效地促进了DLC的创建和签名请求。这一全面的设计不仅保护了比特币交易的完整性、安全性和灵活性，也证明DLC.Link才是整合BTC与去中心化金融(DeFi)的理想基础设施。

How FROST signatures advance the security of DLC technology

DLC.Link also integrates FROST (Flexible Round-Optimized Schnorr Threshold Signatures) to improve security and simplify witness management. FROST's key re-sharing function gives the witness network dynamic management capabilities, allowing participants to quickly adjust without affecting the integrity of the service [4]. When setting up or changing witnesses, the system uses a collaborative approach to generate keys. The entire process creates both a shared key and an individual key for each Attestor. The flexibility of this key generation mechanism ensures that the witness network can be safely modified later without disrupting service.

whenBlockchain事件触发 DLC 合约的创建时，见证者中的协调员会广播 create-dlc 命令，从而生成共识支持的DLC公告。同样，当要关闭 DLC，区块链事件促使协调员安排 DLC最终见证的创建，其中每个见证者的签名确保了合约的安全性和可验证的结束。这一先进的升级引入了对见证者网络的动态调整能力，并显著降低了计算复杂性，同时保持了严格的安全标准。

Figure 1. DLC.Link technical process

Product introduction of DLC.Link

dlcBTC

Set to launch in early 2024, dlcBTC is at the forefront of decentralized finance (DeFi), offering custody-free Bitcoin on the Ethereum network through discreet logging contracts (DLCs). With dlcBTC, users can "self-encapsulate" their deposits, with the BTC locked by themselves and the locking mechanism protected by the authenticator. dlcBTC depositors do not send BTC to DLC.Link or any third party.

In this groundbreaking process, users use DLC to securely lock their Bitcoin into DLC.Link, creating an equal value of dlcBTC. DLC acts as a digital safe on the Bitcoin blockchain, establishing a pre-signed contract between the user and the protocol. Even more secure, key distribution adopts a 2-of-2 multi-signature UTXO mechanism, where one key is held by the user and the other key is intelligently distributed in a network of trusted prover nodes.

Cross-chain bridges have a bad reputation due to their many vulnerabilities. DLCs are a unique solution because it solves the problem of cross-chain communication without the security concerns of bridging. Unlike bridge assets such as wBTC, dlcBTC does not require an intermediary, instead choosing to secure the asset by the entire hash rate of the Bitcoin network. Set to launch in the first quarter of 2024, dlcBTC v1 will introduce features such as whitelist access, strict security measures, multi-functional trading pairs, and seamless integration with existing DeFi protocols, marking a major advancement in the decentralized finance space [ 5].

我们相信，在比特币之后，最去中心化的网络是以太坊。因此，通过dlcBTC，我们致力于将原生BTC引入到以太坊网络的DeFi，而无需构建另一个规模小、未经测试且更加危险的 L2 或解决方案。铸造的dlcBTCTokenUsed as collateral in well-known DeFi platforms such as Curve and AAVE, and enables users to actively participate in DeFi activities such as investing, lending, and hedging.

DLC.Link’s wide application in the Bitcoin ecosystem

DLC.Link is a transformative force within the broader Bitcoin ecosystem, offering a range of applications through its Discreet Log Contract (DLC). This innovation includes credit trading desks, prime brokers, digital asset custodians,exchangeand OTC desks, all of which have special significance. This integration allows custodians to extend financial services to self-custodial Bitcoin customers, support custody and conditional instant transfers of local Bitcoin, and provide borrowing services to miners and other self-custodial Bitcoin customers.

DLC.Link’s role in decentralized finance (DeFi) is equally broad and influential. Its integration facilitates the development of collateralized loans and stablecoins based on on-chain Bitcoin assets, providing advantages to lending protocols. In addition, DLC.Link can also be seamlessly extended to cross-chain protocols to enable the transfer of local Bitcoins between different blockchains. BRC-20 assets are currently hot, and DLC.Link can also accept them into cross-chain bridging [6]. In addition, it supports the trading and lending of inscribed assets in NFT markets (such as OpenSea) and other smart contract-based platforms, bringing new use cases to DeFi.

Figure 2. DLC.Link extensive use cases

Conclusion

The reason why Bixin Ventures strategically invested in DLC.Link in the early seed round is that it hopes that its seamless integration with decentralized finance (DeFi) will help solve the challenges faced by the Bitcoin ecosystem. DLC technology overcomes the limitations of Bitcoin's smart contracts, makes better use of Bitcoin's powerful security, and provides a safer solution. Schnorr Signatures in the recent Taproot upgrade enables DLC.Link to establish a witness network, and the integration of FROST further improves the dynamic management of witnesses. The launch of dlcBTC also responds to the growing demand for secure, decentralized self-wrapped Bitcoin. In addition, DLC.Link also implies huge potential in various other product application layers, including self-custody deposits in CeFi and cross-chain inscriptions in DeFi. Bixin Ventures strategically invested in DLC.Link, demonstrating its commitment to shaping decentralized finance (DeFi). We recognize DLC.Link’s innovative contributions to the crypto space and foresee it playing a key role in providing Bitcoin liquidity throughout the broader crypto ecosystem.

The article comes from the Internet:Bixin Ventures: The BTC ecosystem is exploding, why do we invest in DLC.Link?

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