Newbie questions regarding the Cardano-Bitcoin Bridge

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Newbie questions regarding the Cardano-Bitcoin Bridge

How does a bridge technically work?

How is it possible that one’s BTC can be on the blockchain, while loaning it out on the cardano network?

What would happen if you loaned out your BTC and the loan is not being payed? How can that be communicated to the bitcoin network? Also – creating this loan necessarily demands ADA, where is that ADA coming from? If the user only has BTC.

Finally – doesn’t already existing cryptocurrencies like ETH or Solana already have bridges to bitcoin? Or does this specific bridge have something special that I am missing?

Now, if we suppose that the above statements are true – wouldnt this result in a huge demand for both BTC and ADA?

Furthermore, since we already have a bridge between ADA and ERGO (please, correct me if I am wrong) – wouldnt this result in that ERGO would have an increase in demand as well?

Shabira Shafeek Answered question October 31, 2024
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In UTXO chains, each UTXO is locked by the private key that can sign the transaction to unlock it with a valid signature.

Cardano extends UTXO by allowing other things to lock a UTXO, like a smart contract, you have to satisfy that smart contracts logic to unlock the UTXO.

From what I can tell the BitcoinOS on the Bitcoin chain, is allowing zk proofs to confirm that basic conditions are met so that UTXOs can be unlocked.

So you would lock BTC inside a Bitcoin UTXO, and Cardano eUTXO could see that lock and represent that locked BTC inside Cardano. To unlock the BTC in Bitcoin again, you need to send the ZK proof back to Bitcoin, and to do that you have to do something on Cardano that satisfies a smart contract that locks or destroys the BTC on Cardano.

My explanation is almost certainly wrong in some regard, but I expect that’s the general principle.

Shabira Shafeek Answered question October 31, 2024
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