Interlay Labs to release a new token standard; BRC-21 for minting and redeeming tokens on Bitcoin
Interlay Labs, a Bitcoin decentralized platform has proposed a new BRC-21 token standard for minting and redeeming tokens on the Bitcoin network and supporting Lightning transfers.
The proposal details the standard to mint and redeem BRC-20 tokens to and from Bitcoin that were first created on other “source” chains, such as Ethereum, Cosmos, Polkadot, or Interlay. Thus, BRC-21 is a token standard designed to allow tokens on other chains to be minted and redeemed to and from the Bitcoin Blockchain.
According to Interlay Labs, the proposed standard will allow deploying decentralized stablecoins onto Lightning Network or any similar payment protocols, which is the main use case. However, BRC 21 assets can be used to represent ETH, DOT, SOL, and other crypto alike on Bitcoin.
Also, the standard will solve sophisticated mint, redeem, and liquidation requirements by decentralized stablecoins.
The technical requirements of the proposed standard include:
- Custom indexer: validates the transfer, and redeem operations of BRC 21 on Bitcoin, and the contract state on the source chain.
- SOURCE chain contract: handles mint and redeem operations.
- BTC-Relay: a BTC-light client implemented as a smart contract on the “source” chain. BTC-Relay is capable of verifying the inclusion of BTC transactions and parsing them.
Interlay analyzed that protocols like MakerDAO, Liquity, or RAI that require sophisticated mint, redeem, and liquidation mechanisms to retain their peg cannot be deployed directly on Bitcoin due to a lack of programmability. “The decentralized method of minting and redeeming cross-chain assets to/from Bitcoin has a much higher chance of achieving mass adoption, Instead of investing time in engineering protocols onto Bitcoin that can be represented by a few lines of code elsewhere,” Interlay said.
Interestingly, the deployment operation of BRC 21 is similar to that of BRC-20 tokens, however, there are minor modifications. Also, the deployment procedure depends on the implementation of the source chain (Ethereum or Interlay, etc.)
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