Don't
Wrap,
Replace.
Bitcoin is a revolution in money!
It uses Proof of Work to transform human sourced energy into a borderless sound money for humanity. But is the Bitcoin blockchain necessary once a Bitcoin has been minted?
Cardano is an evolution in blockchain!
It uses the first provably secure Proof of Stake consensus mechanism, Ouroboros. Cardano is built with a similar philosophy to Bitcoin, slow and methodical to establish its trust as a global financial operating system. It adopted the UTxO model used by Bitcoin and extended it to provide smart contract capabilities.
As the spiritual successor to Bitcoin, Cardano is perfectly suited for transacting Bitcoin after it has been minted.
As the spiritual successor to Bitcoin, Cardano is perfectly suited for transacting Bitcoin after it has been minted.
How it works
Many projects exist that aim to provide a “wrapped” version of BTC on other blockchains, including Cardano. The wrapped approach “locks” a quantity of BTC so they can no longer be transacted on the Bitcoin blockchain and then mints a tokenized representation of the same quantity of BTC on the target blockchain. This ensures that the value represented by the original BTC cannot be exchanged while the value exists on a different blockchain. The original BTC can be unlocked, by first burning the tokenized version on the secondary blockchain.
This approach, referred to as wrapping or bridging, does however introduce risk. Any faults in the locking process (whether through technology or human processes) means that the original BTC could be released without first destroying the wrapped version.
The Stake for Bitcoin project is therefore exploring a different approach, that instead of wrapping BTC replaces it. At any moment in time, Cardano’s base currency ADA has a market value that can be exchanged for a quantity of BTC to the same value. By using ADA to acquire BTC, we are able to burn that BTC on the Bitcoin blockchain (providing a proof of burn transaction) prior to minting the same amount as a native asset on the Cardano blockchain (Cardano native assets do not require smart contracts to transact).
Being an experimental form of Bitcoin, Stake for Bitcoin aims to minimize risk to participants by only utilizing staking rewards.
Initial Stake Pool Offerings (ISPOs) are an innovation introduced through the Cardano ecosystem, that allows people to delegate their ADA to a stake pool, but instead of receiving ADA rewards they receive another token being distributed by the ISPO project.
This allows anyone wishing to get exposure to the project’s token to do so without risking their principal ADA holdings.
Stake for Bitcoin will therefore follow the ISPO model to raise ADA that will be exchanged for BTC, which will then be distributed to delegators; proportionate to their contribution to total stake; once the Cardano based BTC has been minted.
Phases of development
Community Building
The Stake for Bitcoin team will provision 1 - 2 stake pools (subject to demand), used to raise ADA for exchange to BTC.- At the end of each epoch the Stake for Bitcoin team will exchange the ADA rewards earned for BTC on a centralized exchange and send it to a Bitcoin burn address.
- Delegators will receive SATS tokens (a Cardano native token) proportional to the ADA rewards they forfeited and its exchange rate to Satoshis (1 millionth of a Bitcoin) at the time. This token will eventually be used to redeem Cardano based BTC once minted, but provides holders the ability to trade their position prior to then if required.
- The BTC minting contract will be developed, tested and released.
- Oracle integration will be used to verify burn transactions on the Bitcoin blockchain and the corresponding BTC amount.
- The community will vote for stake pool operators to be used to replace and expand the source of staking returns being used to convert to BTC. The Stake for Bitcoin team will KYC SPOs to establish trust for the community.
Implementation
Decentralization
- Any stake pool operator will be able to advertise their involvement in Stake for Bitcoin and that staking returns from their pool will be converted to Cardano BTC. Trust will be established through reputation and other community based verification processes.
- Anyone will be able to initiate Cardano BTC minting through submission of a Bitcoin burn transaction hash, that is verified by an Oracle. While this would most likely be participating SPOs, as they will collect the ADA staking returns used to buy BTC and track their delegator’s share, this could also be decentralized to third parties.
Join the revolution today
Get involved and see how you can be part of the next step in crypto.
