0confirmation has been built to bridge the functionality and usability of decentralized finance applications on Ethereum with the liquidity of Bitcoin. Ren protocol did the hard work of creating a protocol for cross chain communication that can facilitate moving assets across blockchains. 0cf is focused on building infrastructure to improve efficiency and reduce friction for cross chain interactions.
The problem being addressed stems from the standard confirmation requirements still being required to complete a cross chain shift. This means users still need to wait a full 6 confirmations on the Bitcoin blockchain before using their newly minted asset on ethereum which can regularly take over an hour. In general shifting a native asset from a chain with a long settlement time to one with a shorter settlement time leaves an opportunity to improve the user experience but also address a couple risks.
While waiting for the standard 6 confirmations for a bitcoin transaction to reach (probabilistic) finality, the price of bitcoin relative to the asset you are looking to acquire can change dramatically. By allowing the transaction to happen immediately the price risk is removed.
A user can initiate a shift, but then while waiting for the appropriate number of confirmations, lose their focus and forget about what they were going to do. This can lead to loss of volume for the application they were intending to use or exacerbate price risk.
0confirmation is solving this problem using an open liquidity pool that issues short term loans managed bonded keepers.
We are committed to being part of a fully decentralized stack facilitating the smooth flow of assets between chains. In version 1 we will be enabling bitcoin holders to initiate a shift of their BTC onto ethereum and make transactions immediately.
When a user initiates an eligible shift, keepers monitor the transaction and if they see it as likely to get to full 6 confirmations within the system liquidation threshold they will initiate the loan taking the following steps.
Post a bond worth 10% of the loan value
Trigger creation of a borrow wallet contract
Initiate loan (deposit renBTC from liquidity pool to borrow wallet)
Execute transation payload
Keepers are responsible for monitoring the shift transaction and the proxy wallet. If the shift transaction is delayed for an extended period of time (set at the protocol level) the borrow wallet can be liquidated (any assets acquired during the loan period are sold for renBTC) to repay the liquidity pool. Any shortage is made up for by pulling from the keepers' bond to make the liquidity pool whole.
RenVM uses an open group of hundreds or thousands bonded nodes performing secure multiparty computation to generate and store private keys and sign messages across integrated chains. This allows it to operate as a decentralized custodian, holding assets from one chain and approving the minting of assets on another.
Origin Chain - In a shift, the base chain for the asset that is being shifted
Target Chain - In a shift, the chain on which the asset is being minted on
Shift - Any minting of an asset on a base chain different than its own using renVM
Proxy Wallet - A smart contract that is generated when a 0confirmation shift is accepted that is controlled by the user but is limited in the tasks it can perform.