The community voted in favor of integrating Bitcoin into Dfinity’s Internet Computer (IC). This upgrade includes two different capabilities:
- Smart-contracts will be able to validate and make native Bitcoin transactions.
- Smart-contracts and users will be able to transact with wrapped BTC tokens on IC’s chain. These wrapped tokens are allegedly non-custodial.
This is the summary of the proposition as worded by the team:
“Summary: A proposal to enable users and canisters on the Internet Computer to transact wrapped bitcoin directly without the use of a centralized intermediary or an intermediary protocol. This is achieved by IC replicas running Bitcoin nodes. “
As of today, no DeFi project is truly Bitcoin-native. Most DeFi platforms use wrapped BTC tokens, the private keys being held by a centralized custodian. In other DeFi projects like liquidity exchange Thorchain, a custodian node transacts on Bitcoin’s blockchain. THOR tokens are held as collateral by the smart-contracts to protect against bad actors, this is what Dfinity calls “over-collateralized stake-backed model”:
“This is the first time we’re able to tokenize Bitcoin without trusted custodians and without the over-collateralized stake-backed model that is not capital efficient. It will not only unlock this asset for the IC, but after the Ethereum integration, IC-wrapped BTC could then be used in Ethereum DeFi.”
— Norton Wang
Dfinity solves this custody problem is called the Chain-Key which the team describes as “novel” and “breakthrough”.
To be continued.
- Discussion on the forum: https://forum.dfinity.org/t/direct-integration-with-bitcoin/6147
- What is Chain-Key? https://medium.com/dfinity/chain-key-technology-one-public-key-for-the-internet-computer-6a3644901e28
- Community conversation: https://www.youtube.com/watch?v=MxBIvPhPzzc&t=1117s
- Consensus used by IC: https://dfinity.org/pdf-viewer/library/dfinity-consensus.pdf