The DeFi platform Sushi has recently announced a partnership with interoperability platform ZetaChain, with the goal of exploring the possibility of native Bitcoin (BTC) swaps for its users across 30 different blockchain networks. This is a significant development in the DeFi sector, as it marks a step towards enabling trading of BTC without the need for wrapping across several blockchains, in a “native, decentralized and permissionless manner.” The integration is expected to include Sushi’s v2 and v3 automated market makers, as well as Sushi’s cross-chain swap, SushiXSwap.
Ankur Nandwani, a core contributor to ZetaChain, has highlighted the potential of this partnership to bring Bitcoin’s vast user base into the decentralized finance (DeFi) sector in a native manner. He also addressed the skepticism around the possibility of bridging BTC without wrapping the assets on another chain, stating that there are already examples, like THORChain, that are trading Bitcoin natively with other chain assets. Additionally, Nandwani emphasized ZetaChain’s approach that allows anyone to build Bitcoin-interoperable decentralized applications (DApps) that can settle contracts and transactions natively.
However, Nandwani also acknowledged the importance of trust assumptions, specifically trusting the decentralization of the network facilitating the cross-chain transactions. ZetaChain has reportedly proven the technology at a testnet level and will be looking to prove its utility when it launches its mainnet, through partnerships with SushiSwap and other DeFi protocols.
The Head Chef of Sushi, Jared Grey, hailed the integration with ZetaChain as a significant advancement for DeFi. He described the capability to swap Bitcoin natively as a “game-changer” for the industry, noting that it is not only about the increased liquidity from Bitcoin, but also about beginning a new chapter in DeFi, where more practical use cases of interoperability and enhanced connectivity can be seen.
The integration with ZetaChain is set to take place in two phases. The first phase will see Sushi introducing a DEX on ZetaChain’s testnet to support basic asset swaps and liquidity provision, followed by beta testing and incentives for application testing. When Sushi deploys its mainnet, it will become one of ZetaChain’s launch partners, and full functionality for Bitcoin interoperability is expected.
Ankur Nandwani explained the technical details behind the functionality that allows for native BTC cross-chain swaps. A cross-chain swap contract is deployed on ZetaChain’s Ethereum Virtual Machine. The contract is omnichain, meaning that it can be called, and the value can be passed to it from any connected chain, including Bitcoin. This process involves the user sending a regular native token transfer transaction on Bitcoin with a special memo to a TSS address, containing the omnichain contract address on ZetaChain and a value that is passed to the contract.
The TSS address is owned by ZetaChain signer validators. BTC transferred to the TSS address is locked, and validators observe this transfer and cast a vote about the event on ZetaChain. If enough votes are cast, the event is considered observed, and an inbound cross-chain transaction (CCTX) is created. 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 swap contract execution, ZRC-20 BTC is swapped for the ZRC-20 of another token, for example, ZRC-20 ETH. The process ends with the withdrawal of ZRC-20 ETH to the destination chain.
This method outlines how native BTC is swapped for native ETH in a decentralized manner, facilitated by ZetaChain’s network validators across connected chains.
In conclusion, the partnership between Sushi and ZetaChain marks an important milestone in the DeFi space, as it aims to bring native Bitcoin swaps across 30 different blockchain networks. This development has the potential to significantly enhance liquidity and the overall use cases of interoperability and connectivity within the DeFi sector.
