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Sushi and ZetaChain redefine DeFi with native BTC swaps

In this post:

  • Sushi’s decentralized exchange (DEX) will be deployed on ZetaChain.
  • The integration between Sushi and ZetaChain will occur in two phases.
  • The integration will include Sushi’s v2 and v3 automated market makers as well as Sushi’s cross-chain swap.

Sushi has announced a groundbreaking partnership with interoperability platform ZetaChain to explore the possibility of enabling native Bitcoin (BTC) swaps across 30 different blockchain networks. The move is expected to significantly enhance the decentralized finance (DeFi) sector by providing a seamless and decentralized method for trading BTC without the need for wrapping across multiple blockchains.

Sushi’s decentralized exchange (DEX) will be deployed on ZetaChain, allowing users to trade BTC in a native, decentralized, and permissionless manner. The integration will include Sushi’s v2 and v3 automated market makers as well as Sushi’s cross-chain swap, SushiXSwap.

ZetaChain’s approach to Bitcoin interoperability

ZetaChain’s core contributor, Ankur Nandwani, believes that this partnership has the potential to bring Bitcoin’s vast user base into the DeFi sector natively. He emphasized that ZetaChain’s approach enables the creation of Bitcoin-interoperable decentralized applications (DApps) that can settle contracts and transactions natively.

Nandwani explained that while there are trust assumptions involved, such as trusting the decentralization of the network facilitating cross-chain transactions, there are already early examples like THORChain that are successfully trading Bitcoin natively with other chain assets.

ZetaChain has reportedly tested the technology at a testnet level and plans to showcase its utility when it launches its mainnet in collaboration with SushiSwap and other DeFi protocols.

Sushi’s head chef, Jared Grey, praised the integration as a significant advancement for DeFi. He described the capability to swap Bitcoin natively as a “game-changer” for the industry, highlighting the increased liquidity and practical use cases of interoperability and enhanced connectivity it brings.

Two-phase integration plan

The integration between Sushi and ZetaChain will occur in two phases. The first phase involves the introduction of a DEX on ZetaChain’s testnet, which will support basic asset swaps and liquidity provision. This phase will also include beta testing and incentives for application testing.

Sushi will become one of ZetaChain’s launch partners upon the deployment of its mainnet. This launch will be followed by the full functionality for Bitcoin interoperability.

Nandwani provided technical details regarding how native BTC cross-chain swaps will be facilitated through ZetaChain’s network validators across connected chains:

A cross-chain swap contract is deployed on ZetaChain’s Ethereum Virtual Machine, which is omnichain in nature.

Users initiate a cross-chain swap by sending a regular native token transfer transaction on Bitcoin with a special memo to a TSS address. This memo contains the omnichain contract address on ZetaChain and the value to be passed to the contract.

The value in the memo represents the destination token, such as Ether (ETH) or USD Coin (USDC) on Ethereum, along with the recipient address on the destination chain.

The TSS address is owned by ZetaChain signer validators. BTC transferred to the TSS address is locked, and validators observe this transfer, casting votes about the event on ZetaChain.

If enough votes are cast, the event is considered observed, leading to the creation of an inbound cross-chain transaction (CCTX) from Bitcoin to ZetaChain.

Once a CCTX is processed, a ZetaChain omnichain contract is called, and the amount of BTC transferred to the TSS address is minted as ZRC-20 BTC.

During the cross-chain swap contract execution, ZRC-20 BTC is swapped for the ZRC-20 of another token, such as ZRC-20 ETH.

ZRC-20 ETH is then withdrawn to the destination chain. During this withdrawal process, ZRC-20 ETH is burned, and an outbound CCTX is created from ZetaChain to Ethereum.

Observer validators vote on this outbound CCTX on ZetaChain. Once processed, native ETH is transferred from the TSS address on Ethereum to the recipient on Ethereum.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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