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Architecture Overview

Philosophy

Bitcoin has become a global phenomenon and a secure store of value, free from government interference and institutional risks. Despite its advantages, Bitcoin's security measures limit its programmability, lacking a smart contract interface for robust financial applications.

Ethereum and other chains have filled this gap with their robust smart contract platforms, driving tremendous growth but also leading to speculation and perceived risks. In the Bitcoin community, Decentralized Finance (DeFi) can be seen as a high-risk venture, associated with volatility and public perception issues.

We believe that Bitcoin is ideal as a settlement layer, to be used within decentralized financial systems on other platforms. Using Bitcoin as a store of value that secures sophisticated applications across various blockchains reduces risks and aligns with a decentralized vision.

Please read more about our philosophy here: https://www.dlc.link/blog/introducing-the-bitcoin-plus-mentality

How DLCs Achieve This Vision

Discreet Log Contracts (DLCs) create a secure and decentralized framework for financial transactions. By predefining possible outcomes for locked Bitcoin collateral, and running the business logic on a blockchain in smart contracts, DLCs significantly minimize the potential for errors or malicious acts.

This structure also ensures that the details of Bitcoin payments and wallets are kept secret, aligning with the principles of privacy and trust-minimization. Furthermore, the use of Bitcoin Attestors in a consensus-based, abstract manner adds another layer of security, leveraging the power of decentralized security while maintaining integrity and trust in the system.

Supported Blockchains

Currently we're supporting Ethereum or a corresponding L2. Other EVM chains will follow soon, and then Solana, Polkadot, Cosmos and other chains will be added later.

Steps of a DLC

A Standard DLC Flow

Mint flow

  1. The user initiates an atomic swap between themselves and the DLC.Link Bitcoin bridge. This is known as the pre-funding transaction. This means the user locks their bitcoin into a time-lock transaction, and automatically gets it back if anything goes wrong during the process. As an example, if the user does not claim the ERC20 tokens, they bitcoin will automatically return to them.
  2. The user creates two transactions (partially signed bitcoin transactions) to send to the attestors.
    1. The first, known as the funding-transaction, will be used to spend the UTXOs from the pre-funding transaction.
    2. The second, known as the payout-transaction will be used as the future final payout of the DLC. This is built in such a way that the bridge can only send the locked collateral back to the original owner.
  4. The attestor network enters its validation phase, verifying the DLC pre-funding transaction is confirmed and valid, and checks the general health of the platform to ensure everything looks good.
  5. If all is valid, the attestors call the setup function on the bridge EVM contract, preparing the ERC20 dlcBTC tokens.
  6. When the user claims the ERC20 tokens from the hash, she is required to reveal a secret to the attestors, as part of the atomic swap process.
  7. The attestors use the secret to unlock pre-funding tx into the standard DLC funding tx, where it will stay until it’s paid back to the user upon redeem.

Redeem flow

  1. Later, when the ERC20 tokens are burned, the attestors pick up that event from the smart contract chain, sign the closing transaction, and the user’s BTC is spent back to their wallet.

Now that we've described the whole DLC flow, we can discuss each piece of the technology individually.

Components of the DLC.Link Architecture

DLC Attestors

The most important part of the DLC.Link architecture is the DLC Attestation Layer. Similar in some ways to "validator networks" on bridges, the DLC Attestors work have two main functions:

  1. Bridging BTC to EVM chain
    1. The DLC.Link Attestors accept the details of a BTC bridging request, which consist of a PSBT and a locking transaction, and check the state of a controlling EVM contract.
    2. Once validated and confirmed on BTC chain, the nodes form a consensus and use a threshold ecdsa signature to execute the bridging action on the smart contract. In the case of the DLC.Link bridge, that mints dlcBTC tokens.
  2. Redeeming BTC from EVM chain
    1. Later, the DLC.Link Attestors listen for a corresponding event on EVM. In the case of the DLC.Link Bridge, this would be the burn of the associated dlcBTC tokens. The Attestors form a consensus and sign a schnorr threshold signature to unlock the previously locked BTC collateral, and broadcast out the bitcoin TX.
    2. When the redeem tx is confirmed, they again form consensus and use a threshold ecdsa signature to close the DLC flow.

The Bitcoin Attestors consist of independent nodes running DLC Attestor software. They are managed and run by independent third-party node operators, who may run exactly one node each. Together they make up the Bitcoin Attestation Layer for DLC.Link.

With no business logic in the Attestor, but rather just a listen-and-sign mechanism, discreetness and security are ensured. Through a reputation system and back-checking entity run by all the nodes, which verifies the results of the Bitcoin Attestors on-chain, we can be sure that an Attestor is behaving well. This verification guarantees the accuracy of the Attestors' actions and provides assurance against manipulation at any point in the process. This is then completely visable through the DLC.Link Health Dashboard (coming soon).

Bitcoin Attestors, operated by various independent node operators, work to attest to the payout outcomes in a decentralized manner. Misbehaving Attestors can be penalized through slashing, maintaining integrity.

Read more about Bitcoin Attestors here: https://www.dlc.link/blog/what-is-a-bitcoin-attestor

Supported Bitcoin Wallets

DLC.Link technology is supported by any bitcoin wallet which supports Taproot, and can sign PSBTs. We are working to put together a list of wallets confirmed to be compatible (coming soon).

Smart Contracts

At DLC.Link, we believe the power of Bitcoin will be fulfilled when it is bridged in a decentralized, non-custodial way to a reputable smart contract chain where it can be fully leveraged. We therefore have powered our DLC.Link Attestors by our secure and heavily audited smart contract on an EVM chain. With this design, verifying the bridge is operating correctly (audit) is simple and clear, as the Attestors are simply responsible for doing consensus signing of the requests which come from the EVM contract.

Our contracts are fully open source, and can be found in the Solidity section on this docs page.