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

Bitcoin’s Taproot upgrade introduces Schnorr signatures, which are more advanced than ECDSASafetyAlternative for creating and verifying keys. Schnorr signatures have linear properties and can effectively verify multiple transactions at once by combining public keys and signatures [1]. Discreet logcontract (DLC) takes full advantage of the Schnorr and PTLC technologies already implemented in Tarproot. Because these two technologies are already native features of the Bitcoin network, there is no need to rely on them when using DLC.L2或侧链。相反，DLC技术由整个比特币网络的算力保护，使其更为Safety可靠。

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 toBlockchain上触发contract执行[2]。这展示了DLC技术在实际应用中的普适性、灵活性和安全性。

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, publicly announce DLC events in JSON format. from a data source (anotherBlockchainAfter obtaining the corresponding result through the smart contract on it, the witness certifies it and signs it. To enhance security, DLC.Link adopts 5-of-7 witness multi-signature, which reduces the risk of collusion between witnesses and one party to the contract. The DLC.Link management contract will randomly select untrustworthy witnesses from the whitelist [3]. The design also allows third parties and organizations to run witness nodes, thereby further promoting decentralization. The decentralized witness network avoids single points of failure and effectively facilitates DLC creation and signature requests. This comprehensive design not only protects the integrity, security and flexibility of Bitcoin transactions, but also proves that DLC.Link is the ideal infrastructure for integrating BTC with decentralized finance (DeFi).

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].

We believe that after Bitcoin, the most decentralized network is Ethereum. So with dlcBTC we are working to bring native BTC to DeFi on the Ethereum network without having to build another smaller, untested and more dangerous L2 or solution. Minted 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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