VSC: Wrapped Bitcoin on Hive.

edicted in #hive-167922 • last year

BTC Wrapped on Hive will be better and less centralised than BTC on the Lightning Network.

This is quite a bold claim coming from our very own @brianoflondon but then again he does seem to be the authority around these parts on the Lightning Network. We continue to push forward with smart contracts on the Hive blockchain, but how does it work? I suppose it's time to start dipping our toes now that a prototype is up and running.

If you've followed Brian's posts at all and his trials and tribulations with running a Hive >><< BTC bridge across the lightning network you'd know that the LN is a complete shitshow full of grand delusion. It's complicated. It's expensive. It's not sustainable. It scales up instead of out: It's centralized. It's buggy and glitches often. It can be risky, and there are new known threat vectors like cycling attacks.

With all this in mind it's not exactly preposterous to say that Hive could actually create a better iteration than that by leveraging DPOS. Of course it is certainly blasphemy if uttered to the cult of maximalism.

https://wrap.vsc.eco/

@starkerz did me a solid by sending me a tiny bit of wrapped Bitcoin on the centralized prototype. At this point my understanding is that it currently all runs on a single node and we have to trust @vaultec, which is obviously fine in these early stages... just don't go transferring your life savings just yet.

So what?

Well first of all simply the ability to trade sats back and forth using nothing but Hive keys is pretty badass, but also the system Vaultec is building here seems to be a lot more scalable than anything those BTC maxis are going to cook up. That's the magic of DPOS I guess.

More importantly this is an obvious precursor to the ability to create liquidity pools to Bitcoin. This is something we have desperately needed for a while now with the regulators hammering away at every "problem" as though it's a nail. I would like a divorce from centralized authority; please and thank you.

What do liquidity pools for Bitcoin mean?

Unlike the Lightning Network which has zero other tokens available for trade... Hive has two other assets on the mainline. Hive and HBD. This means we can extend out the second layer and build HIVE/BTC and BTC/HBD trading pools. Exactly how those would work is a bit above my paygrade at the moment, but the ability to transfer wrapped BTC on Hive certainly allows for such development.

Brief Rundown of the operation.

So the question we have to ask ourselves is how something like this differs from Hive Engine and whatever else. Looking at the proposal itself for VSC provides a lot of the information we're looking for.

Initially my first question was,

"How is it possible to know what Bitcoin is doing?"
Are VSC nodes running Bitcoin nodes?
Sounds expensive.
Maybe it's just oracles?

The easiest way to explain is it's essentially a compressed copy of the Bitcoin blockchain into a relatively light weight smart contract.

Interesting!

I won't pretend to know what a "compressed copy" of Bitcoin is, but it would make sense if VSC nodes only paid attention to wallets that were actively involved in the wrapping process and other smart contracts on Hive. Again I have no idea how it actually works but it would make sense that a light weight contract could be employed without any major sacrifices to security.

Based on this limited documentation it appears as though anyone might be allowed to host collateral on their VSC node and issue wrapped tokens, but the overcollateralization of the Bitcoin could have limitations imposed by DPOS reputation. I've missed a couple talks explaining exactly how all this works so I'll have to make sure to put my study cap on going forward.

The security itself is 'simply' an extension of DPOS voting. Those with the most votes will control multisig keys on Bitcoin and wherever else. In theory the only way the system fails is if over 50% of the trusted nodes collude the cheat the system. So far this has been a system that works quite well despite all the conjecture to the contrary. If the liquidity pool honeypots get too big we may have to come up with other ways to mitigate the risks, but that is hardly a 'now' problem.

Conclusion

It's nice to see an actual working prototype that leverages DPOS and multisig to collateralize assets directly on the Bitcoin blockchain to create valuable secured derivatives on Hive. By all accounts this is just a small subset of what VSC contracts can actually accomplish in the long term, but that of course is all unrealized potential. An orchard is just a bunch of trees until the fruit is actually picked.

Smart contracts are a critical piece of the puzzle when it comes to what Hive needs but has been missing out on all this time. The question remains how do we secure these contracts without wasting tons of resources like EVM chains are infamous for. I'd like to think that VSC is presenting us with a real solution that we can build on and scale into the future.

#leofinance #proofofbrain #vsc #bitcoin #hive #hbd #wbtc #derivative #smart-contract

last year in #hive-167922 by edicted

52.20 VYB

Sort:

Trending

[-]

ssjsasha last year

would be cool if one day I can choose to get hbd/hive/or wbtc as a reward on hive

0.00 VYB

[-]

jeffbuilds last year

The vsc node software is pretty easy to setup too. :-)

0.00 VYB

[-]

starkerz last year

Well, as you can see, I have already transfered my life savings to VSC wrapped Bitcoin

0.10 VYB

1 vote

[-]

edicted last year

high roller

0.00 VYB

[-]

jphamer1 last year

Two things Hive can captilise on, its decentralised dex and the stable coin. However id literally switch over to Bitcoin SV now in advance because its fast and cheap and yeah just fuck the BTC network. Hive can then pitch itself outside the realms of centralisation or control and rival ethereum because it's cheaper. The aim is onboard people to Hive by offering better solutions. The regulators and COPA will do the rest.

0.02 VYB

1 vote

[-]

starkerz last year

this is the way

0.00 VYB

1 vote

[-]

tokenizedsociety last year

I also need to put my study cap on and dive deeper into it but I did some testing during the CTT show and it seems super promising

0.00 VYB

[-]

jamezmccoy1 last year

This is great news

0.00 VYB

[-]

india-leo last year

This post has been manually curated by @bhattg from Indiaunited community. Join us on our Discord Server.

Do you know that you can earn a passive income by delegating your Leo power to @india-leo account? We share 100 % of the curation rewards with the delegators.

_{100% of the rewards from this comment goes to the curator for their manual curation efforts. Please encourage the curator @bhattg by upvoting this comment and support the community by voting the posts made by @indiaunited.}

0.00 VYB

[-]

bozz last year

Does this taken into account liquidity? I had a friend give me some money to invest and I decided to keep it in SWAP.BTC on the HIVE chain. It wasn't that hard to get it in, but I started to realize if I ever wanted to get it out, I might run into liquidity issues. Even though it isn't much. I just looked a the order books and I guess there is more action happening with SWAP.BTC than I realized.

0.09 VYB

2 votes

[-]

edicted last year

HiveEngine fees are pretty high and moving BTC is expensive as well.
The way these two things work is completely different.
I still need to learn a bit more to explain it well.

0.04 VYB

2 votes

[-]

bozz last year

Gotcha.

0.00 VYB

[-]

michelmake last year

Glad to see there are more people having a hard time wrapping their head around all this. Guess we have to just keep learning!

Like your TLDR; on the lightning network :D

If you've followed Brian's posts at all and his trials and tribulations with running a Hive >><< BTC bridge across the lightning network you'd know that the LN is a complete shitshow full of grand delusion. It's complicated. It's expensive. It's not sustainable. It scales up instead of out: It's centralized. It's buggy and glitches often. It can be risky, and there are new known threat vectors like cycling attacks.

0.62 VYB

4 votes

[-]

brianoflondon last year

@edicted is like an LLM which has absorbed everything I've written on Lightning and is able to turn this out and he's pretty much spot on 🤣

0.00 VYB

1 vote

[-]

bitcoinflood last year

I wonder how much Hive is going to get dumped 😂

0.00 VYB

[-]

rafzat last year

I still find it a bit difficult to understand what it means when they say BTC wrapped on Hive

0.00 VYB

[-]

vaultec last year

I'd like to clarify/correct a few things in this article so there is no misinterpretations.

Firstly, you are correct in your understanding of using a "compressed copy" of Bitcoin. The chain relay smart contract as part of the wrapping process very literally verifies Bitcoin block headers inside the smart contract. Providing layer 1 security to verify chain state and ultimately wrap/unwrap operations. This approach means we can securely verify Bitcoin without VSC nodes directly needing to run Bitcoin core, keeping the entire network lightweight.

it appears as though anyone might be allowed to host collateral on their VSC node and issue wrapped token

Separate piece of software. VSC core doesn't directly do wrapping.

The security itself is 'simply' an extension of DPOS voting. Those with the most votes will control multisig keys on Bitcoin and wherever else

There is no DPOS or multisig on Bitcoin. Wrapping consists of only collateralization and chain proofs. VSC does do multisig and DPOS on the hive side to bring assets from HIVE into VSC world, but not for other chains. A multisig on Bitcoin would be inefficient, expensive, and not up to high security standards. The Bitcoin wrapping technology was designed to prevent fund loss even if well above 50% of nodes were malicious. Being a malicious node will never be profitable and will result in attackers always losing their money, while users still being largely unaffected

2.12 VYB

8 votes

[-]

fitnessverve last year

Being a malicious node will never be profitable and will result in attackers always losing their money, while users still being largely unaffected

Can you go into more detail how this works?

0.00 VYB

[-]

vaultec last year

If a wrapping provider fails to complete an upwrapping request after a certain period of time, the BTC being unwrapped gets liquidated for the collateral of the wrapping provider. This results in users always getting their money back, and the malicious wrapping provider always losing their money. Good providers will earn rewards off successful wrapping operations, and can continue to do so as long as they are truthful.

0.52 VYB

1 vote

[-]

brianoflondon last year

Those with the most votes will control multisig keys on Bitcoin and wherever else.

My understanding is that the BTC will actually remain solely in the hands of the wrapper because any attempt to lock it up with multisig will lead you down the crazy path of Lighting where each channel is a two party multisig amount of bitcoin.

That is a main chain transaction to put BTC in to Lightning and another to take it out: VSC will have this.

But on Lightning that BTC is ONLY useable by two parties shuffling it back and forwards. This is the critical design problem with Lightning: it is inherently between two fixed points and those points have to be servers. All the added complexity exists because you need routing nodes to forward other people's transfers.

A Hive backed system allows point to point transfer: you can replace custodial Lightning Wallets AND full bitcoin nodes on servers running 24x7 with Hive accounts!

@vaultec kinda said this but I hope my explanation helps.

So the idea here is that the BTC remains technically at risk of being absconded with by the wrapper, but in return the wrapper has staked HBD or Hive or some other collateral which is held in a non BTC multisig and can be slashed if the wrapper fails to honor a commitment in some way.

0.38 VYB

2 votes