> For the complete documentation index, see [llms.txt](https://docs.ducatprotocol.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.ducatprotocol.com/how-ducat-works/overview.md).

# Overview

Ducat is a Bitcoin metaprotocol for borrowing UNIT against native BTC collateral. Collateral stays in Bitcoin transaction outputs; UNIT transfers use the Runes protocol. Ducat software interprets the additional records that establish which borrowing, repayment and liquidation actions are valid.

### Who does what?

| Component                      | Responsibility                                                                                                               |
| ------------------------------ | ---------------------------------------------------------------------------------------------------------------------------- |
| Bitcoin                        | Confirms transactions and enforces signatures, hashlocks and other script conditions.                                        |
| Transaction builder and wallet | Construct Partially Signed Bitcoin Transactions (PSBTs), display the requested action and obtain the user's signatures.      |
| Guardian Network               | Checks proposed operations against protocol rules and supplies the guardian signatures needed to spend the relevant outputs. |
| Oracles                        | Sign BTC/USD price commitments and release the corresponding threshold preimages when their breach conditions are satisfied. |
| Ducat validators               | Reconstruct protocol state from Bitcoin, validate vault actions and track active and reserve UNIT separately.                |
| Anchor Contract                | Publishes the protocol's identity, recognised asset commitments, authorised keys and parameters.                             |

Bitcoin Script does not itself calculate debt, collateral ratios or the BTC/USD price. Guardian signing policy and independent protocol validation supply those checks. See [Architecture](/how-ducat-works/architecture.md) and [Trust Assumptions](/trust-assumptions/overview.md).

### Collateral, debt and UNIT

A [vault](/how-ducat-works/vaults.md) holds BTC and records a UNIT debt balance. Opening a vault or borrowing more UNIT uses a linked issuance transaction and vault transaction. An accepted vault action activates the corresponding UNIT amount in Ducat's ledger.

Repayment burns active UNIT and reduces the vault's debt. Depositing or withdrawing BTC changes collateral without changing debt. Full repayment leaves a debt-free vault that can then be [closed](/how-ducat-works/vaults/close-vault.md).

[Liquidation](/liquidations/basic-mechanics.md) transfers debt and reclaimable collateral into a liquidator's vault. It does not itself extinguish the transferred debt.

### Records and parameters

The [Anchor Contract](/how-ducat-works/anchor-contract.md) is a published data record. Vault outputs, Rune transfers and compact vault metadata provide the on-chain evidence used by validators. The [Vault State](/how-ducat-works/vault-state.md) page explains the distinction between stored data and calculated metrics.

The [parameter reference](/how-ducat-works/protocol-parameters.md) identifies a specific UNIT/USD mainnet anchor and its values. Those values must not be applied to a different network or protocol profile without verification.

DUCAT-token governance is a planned component. The [governance pages](/governance/governance.md) distinguish that design from the published anchor and implemented validation mechanisms.