Please describe your proposed solution.
anetaBTC is a decentralized, fully on-chain, wrapped BTC product that allows users to seamlessly unlock their BTC value on Cardano and Ergo.
AnetaBTC enables Bitcoin holders to unlock the value of their assets in a secure and efficient environment to provide yield, without selling any Bitcoin and without any third-party custodian involvement, as in the case of wBTC which is on the Ethereum blockchain and is the largest wrapped Bitcoin protocol today with over $5 billion of locked Bitcoin value.
Wrapped Bitcoin has the potential to provide Cardano essential liquidity required for most all DeFi applications by transferring the full value of Bitcoin on a 1:1 basis — Bitcoin is by far the highest valued cryptocurrency, opening up the potential to bring massive value to the Cardano ecosystem.
AnetaBTC is crucial infrastructure to progress blockchain technology and decentralization — true decentralization, without any third-party intermediaries. AnetaBTC will be entirely on-chain using smart contracts and fully compatible with cross-chain decentralized exchanges on Cardano.
AnetaBTC is taking an Interlay-style approach with our wrapped BTC integration, and begins with mimicking the traditional BTC-relay in design.
This method leverages 1FA authentication, where the authentication comes from a decentralized group of relayers submitting events that occur on the Bitcoin blockchain, to the BTC-relay that exists on Cardano. Anyone can elect to be a relayer.
Anyone can choose to become a vault, as long as they provide enough collateral to cover the value of the assets in their vault, and thus ensure that they are a good actor in the ecosystem. If a vault acts maliciously (think stealing the Bitcoin that is sent to it), then its collateral is slashed, and the end-user gets reimbursed in multi-asset collateral at a beneficial rate.
Instead of relying on trusted members to ensure reliable cross-chain information, anetaBTC relies on decentralized vault operators who must contribute collateral to become a vault.
There are three different endpoint smart contracts that allow anetaBTC to function:
- Issue smart contract → allows the creation of Bitcoin-backed tokens, deemed as anetaBTC on the BTC-relay.
- Transfer smart contract → allows the transfer of anetaBTC to others within the Cardano ecosystem.
- Redeem smart contract → allows the burning of Bitcoin-backed tokens on the BTC-relay and the reception of 1:1 of the amount of Bitcoin in return.
We have been researching and developing since our inception in November 2021, and are planning to release our testnet in Q3. When live, users will be able to wrap their BTC onto the Cardano network and then use anetaBTC for take out loans on lending protocols, and trade on decentralized exchanges such as our partners' platforms, Minswap and ErgoDEX.
Please describe how your proposed solution will address the Challenge that you have submitted it in.
This solution will enable Bitcoin holders to unlock the value of their assets in a secure and efficient environment to provide yield and use other financial applications on Cardano, without selling any Bitcoin and without any third-party custodian involvement, as in the case of wBTC which is on the Ethereum blockchain and is the largest wrapped Bitcoin protocol today with over $5 billion of locked Bitcoin value.
In short, this will allow holders of Bitcoin to use anetaBTC on Cardano in a completely decentralized manner.
What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?
The main risks are currently a lack of funding and potential security exploits. To this day, anetaBTC has not accepted any money from VCs or private investors, and has been entirely community driven. We would like anetaBTC to keep this dynamic and continue to prioritize our the best interest of our community. It is crucial, however, that we are able to ensure long-term development and continue developing over the next 6 months.
Additionally, wrapped protocols and bridges, especially on Ethereum, have a history of poor security, leading to hacks and exploits. To mitigate this risk, we are led by researchers and security engineers from the most prestigious universities and institutions around the world. Additionally, we are working closely with Kyber Network, the inventors and developers of wBTC and KyberSwap. WrappedBTC and KyberSwap, are widely considered the more innovate platforms on Ethereum. To this day, neither of these platforms has experienced a hack or exploit.
Furthermore, another plan to mitigate the risks of losing community members' Bitcoin, the NETA Community Fund's Bitcoin reserves will be minted and redeemed as anetaBTC, thus displaying the security of the protocol and instilling trust in the protocol. The NETA Community Fund currently holders 2.003 BTC, and we plan to continue acquiring more.