Trustless Bitcoin Bridge Launched on Kusama Network. Polkadot Next.
In every chaos, there is order — and so there is in Kintsugi. Despite being an early canary network, the team kept sticking to its deadlines and step by step, following the roadmap methodically. And here we are today:
Interlay launched the Kintsugi Bitcoin bridge — the first trustless Bitcoin bridge on Kusama.
What makes kBTC unique
Interlay’s wrapped Bitcoin kBTC is the BTC equivalent of Maker’s DAI, extended with a physical settlement. It is an algorithmic Bitcoin stablecoin secured by a decentralized network of vaults, a multi-collateral system and cross-chain cryptography.
kBTC is a 1:1 Bitcoin-backed asset on Kusama, and it is physically redeemable 1:1 for BTC.
Being a canary network doesn’t mean that Kintsugi could go ahead without passing an academic peer-review and scrutiny by both the Bitcoin and Ethereum community at various conferences. It has also been audited by NCC, Informal Systems, Quarkslab and reviewed by SRLabs.
How to mint kBTC
First thing first, you need to have Bitcoin! Next step — lock your BTC with a decentralized network of custodians (so-called vaults) to mint kBTC. You can use kBTC across all DeFi applications.
Vaults are over-collateralized in assets such as KSM and stablecoins. This collateral acts as insurance should vaults steal or lose the BTC. In case of failure, the collateral is slashed, and BTC depositors are reimbursed at a premium rate.
How are the vaults incentivised, you may ask! From minting fees and network rewards — and soon from re-using locked-up BTC and collateral for DeFi yield such as borrowing and lending.
Where to find and use kBTC
kBTC can already be accessed on parachains, including Karura (by Acala) and Moonriver (by Moonbeam). In practical terms, it enables integrations with decentralized exchanges (Solarbeam and Zenlink), lending platforms( Moonwell), and stablecoins (kUSD) without introducing centralization/counterparty risk.
To boost kBTC liquidity and utilization, the Interlay network treasury, together with other parachain treasuries, is preparing to introduce special incentives.
‘There is 14 billion USD worth of Bitcoin “DeFi” on Ethereum, controlled by a handful of centralized custodians, behind KYC, with no remedy for users or Dapps if something goes wrong. Even big players like Maker, Compound and Aave implicitly trust a few tradiFi institutions. Interlay decentralizes BTC custody, protecting Dapps and users while incentivizing institutional custodians to onboard and derisk.” — Alexei Zamyatin, Interlay Co-founder & CEO.
As a canary network, kBTC is following a multi-phase launch process. While anyone can spin up a Vault, initially the amount of BTC locked will be limited — using collateral ceilings like in MakerDAO.
The initial ceiling is USD 400,000 worth KSM collateral. Once maxed out, governance will propose to double the ceiling to 800k, then to 1.6 million, etc. gradually scaling. In parallel, new kBTC integrations and use cases will be released, balancing supply and demand.
The launch of kBTC is a huge step forward in our vision of true Bitcoin DeFi…but this is just the beginning! Next is the launch of Interlay’s flagship product interBTC (ticker: iBTC) on Polkadot. While kBTC will focus on experimenting with different collateral risk models and novel BTC use cases, interBTC (iBTC) will focus on stability and liquidity, integrating with battle-tested use cases such as stablecoins, AMMs and lending markets. In parallel, the Interlay team is already working on bridging interBTC toCosmos and Ethereum from Polkadot/Kusama using new and existing cross-chain bridges — planned already in 2022.
We envision a future where blockchains seamlessly connect and interact: anyone can use any digital asset on any blockchain, trustless and without limitations. We work with Bitcoin, Ethereum, Polkadot, Cosmos, and others to expand interoperability, capital efficiency, and openness.
Our flagship product is interBTC — Bitcoin on any blockchain. A 1:1 Bitcoin-backed asset, fully collateralized, interoperable, and censorship-resistant, realizing the true free nature of BTC and decentralized finance.