Polkadot News
Published in

Polkadot News

Short about: InterBTC & Kintsugi BTC

With the launch of Polkadot on the horizon in January 2020, the Web3 Foundation commissioned Interlay to create a trustless bridge from Bitcoin to Polkadot based on XCLAIM — a properly designed, open, and trustless system that ensures the security of user funds.

Funded by a Web3 Foundation grant, the interBTC bridge, which is written in Rust and built with Parity’s Substrate framework, enables users to generate 1:1 Bitcoin-backed assets on Polkadot — interBTC — and utilize them in a variety of applications such as decentralized exchanges, stablecoins, and lending protocols.

How it works

Cryptocurrency-Baked Assets

XCLAIM, the framework that underpins the interBTC bridge, introduces the concept of cryptocurrency-backed assets at the core. In the form of 1:1 BTC backed-assets, assets are locked on Bitcoin and unlocked on Polkadot (interBTC). InterBTC may be utilized in the Polkadot ecosystem exactly like any other native asset, which means they can be easily moved and integrated into other Parachains and apps.

Issue, Trade, Redeem

XCLAIM is made up of three core protocols, which are similar to the interBTC life-cycle:

InterBTC can be stored on Polkadot eternally (there is no expiry date) and redeemed at any time. Users that earn interBTC using Polkadot do not require a BTC wallet until they wish to redeem the tokens for BTC.

Security and other additional features

Users can redeem interBTC tokens for the corresponding amount of BTC or be reimbursed in the DOT at any time, according to XCLAIM. To summarize, XCLAIM is as follows:

Financial security is provided by intermediaries who pledge collateral and cryptographically prove correct behavior. Any theft attempt is automatically punished, and users are compensated.

Permissionless and dynamic: any user can become their own intermediary — simply, at any time, and without asking permission. There’s no need to rely on anyone else or any specialized hardware.

Censorship Resistant: Vaults have no influence over the Issue process by design. That is, no Vault can stop a user from minting or acquiring interBTC.

Fast and Efficient: XCLAIM as well is 95% faster than traditional HTLC atomic swaps with Bitcoin.

Participating in the BTC Parachain

The design of XCLAIM emphasizes openness and permissionlessness. As a result, any user can take on multiple roles at the same time — but they can also leave the system whenever they want. As a result, to participate in the BTC Parachain, you have the following options:

Users: On the BTC Parachain, there are two types of users:

  • Liquidity Providers bind BTC to Vaults in order to mint 1:1 backed interBTC on the Parachain. Bitcoin wallet and Polkadot wallet are required.
  • End-users obtain interBTC on Polkadot from liquidity providers and use it for payments and applications. Requirements: Polkadot wallet.

Vaults are collateralized intermediaries that hold BTC that is locked to Bitcoin. By simply locking DOT collateral, any user can become a Vault. The only things you need are a Bitcoin wallet, a Polkadot wallet and some DOTs.

By submitting block headers to BTC-Relay, the BTC Parachain’s Bitcoin SPV client, relayers ensure that the BTC Parachain is up to date with the state of Bitcoin. Requirements: Bitcoin full node, a Polkadot wallet, and some DOTs.

Collators participate in the BTC Parachain’s NPoS consensus, as per Polkadot consensus rules. Parachain full node and DOTs are required.

What is Kintsugi

Kintsugi is interBTC’s canary network, a real-economy testnet running on Kusama (Polkadot’s canary network). Kintsugi and interBTC have the same code base, but Kintsugi will be 2–3 releases ahead of interBTC, implementing more pilot features.

Kintsugi’s KBTC brings fully open Bitcoin to Kusama to kickstart liquidity for parachains such as Karura, Shiden and Moonriver.

How it works

The process of minting and redeeming BTC for kBTC is as follows:

Additional security features:

● Insurance: In a MakerDAO-inspired multi-collateral system, vaults lock collateral on the kBTC parachain in various digital assets. When Vaults misbehave, their collateral is reduced and users get compensation.

● Open in a radical sense: Anyone, at any time, can become a Vault and help secure kBTC.

Decentralized Governance

Kintsugi will be governed by its community from the start, with the help of KINT, Kintsugi’s governance token. As airdrops and block rewards, KINT tokens will be distributed to network participants, builders, and early backers. There will be no public sale or initial coin offering (ICO).

Tokenomics

The primary functions of the KINT token are as follows:

Governance: KINT holders vote on governance proposals and elect council members to make operational decisions.

Utilities: Kintsugi will accept transaction fee payments in KINT and other digital assets in the short term, in addition to KSM.

Emission and Supply

KINT has an infinite supply. The following is the emission schedule:

● Over the first four years, 10 million KINT will be emitted (4:3:2:1 million).

● Following that, there will be annual inflation of 2%.

Distribution

The community will control KINT:

Only the community receives fresh KINT from annual inflation beginning in year 5.

Learn more about InterBTC and Kintsugi BTC:

Twitter | Discord | Telegram (announcements) | Telegram (community) | Newsletter (signup)

❤️ Follow Polkadot News: Telegram, Twitter.

--

--

--

Ambassador of Polkadot and Bifrost networks, member of ZenlinkDAO Initial Governance Board

Recommended from Medium

Community update #9 (weeks 10–11)

THE REINDEER TOKEN OVERVIEW

Wibson Update 01.03.2020

NFTs: Deed to your Uhive Space!

Deri Protocol Monthly Report for January 2022

How to Participate in Kakushin ICO Referral Program

[MainNet Stage] Cocos-BCX‘s First Batch of 38 Ecosystem Buidlers & Angels List

Bitcoin is not a safe haven

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Polkadot News

Polkadot News

Polkadot Ecosystem: Weekly Digest and Projects overview. Polkadot Ambassador.

More from Medium

Polkadot Ecosystem Weekly Digest. Dec 13 — Dec 19

TOP 5 UPCOMING PROJECTS ON THE POLKADOT NETWORK

Polkadot XCMP Explained — How Parachains Talk to Each Other

Overview of the current crowdloans on Kusama. The 4th batch of parachain auctions.