Multi-Party Computation (MPC) Network

The MPC Network

The Ducat Protocol derives its security from the Bitcoin network but enforces its metaprotocol rules through a Multi-party Computation (MPC) network powered by the Flexible Round-Optimised Schnorr Threshold Scheme (FROST). This distributed node cluster functions as a scriptless multisig, producing a single aggregated signature which, combined with the user’s signature, secures Bitcoin collateral. This setup enables the issuance of UNIT debt while preserving Bitcoin’s decentralisation and security.

Role and Functionality

The MPC network acts as a decentralised co-signer. It evaluates, reconstructs, and countersigns Partially Signed Bitcoin Transactions (PSBTs) submitted by users. The network ensures that all transactions comply with Ducat’s protocol rules, such as maintaining required collateralisation ratios and validating liquidation conditions.

Importantly, the MPC network does not custody user collateral. Instead, it functions as a verification and enforcement layer, ensuring that protocol operations remain consistent and secure.

Vault Tokens and On-Chain Data Integrity

Protocol data is auditable through Ducat vaults, with information embedded in transaction inputs and outputs. Each vault-related action includes an OP_RETURN output containing key data points:

• UNIT balance

• Oracle timestamp

• Liquidation price

• Threshold hash

• Vault action

• Protocol version

These data points allow derivation of essential vault metrics, including collateralisation ratios, issued debt, and ownership details. The Vault Token, held in the user’s wallet, references this on-chain data and supports seamless protocol upgrades, maintaining data integrity across protocol versions.

Liquidation Mechanics and Security Layers

Liquidations are triggered when a vault’s collateralisation ratio drops below the governance-defined liquidation threshold. The OP_RETURN output contains a RIPEMD-160 hash, which, together with oracle data, determines the preimage needed to unlock the liquidation path.

Liquidation security relies on a multi-layered approach:

• Oracle blindness: Oracles provide price data without tracking individual vaults, reducing the risk of targeted manipulation.

• MPC oversight: The MPC network acts as a backstop, verifying oracle outputs and using internal price references to prevent malicious liquidations.

• Decentralised indexing: Users can operate independent indexers to verify vault status and protocol adherence, enhancing transparency.

Decentralisation and Transparency

While the Ducat Protocol does not permit unilateral exits (users cannot bypass protocol rules to withdraw collateral), it maintains transparency through:

• Decentralised governance: Protocol rules are governed by DUCAT token holders.

• MPC network enforcement: Protocol compliance is maintained without centralised custodianship.

• Independent indexers: Users can verify all on-chain activity, ensuring system-wide integrity.

The MPC network is not merely a technical component; it is the enforcement core of the protocol, ensuring transaction validity, collateral security, and strict adherence to governance-defined rules.