Asset Management
All stablecoins issued by a Ducat vault must be backed by at least 160% Bitcoin collateral. However, due to limitations in Bitcoinβs current scripting capabilities, this level of collateralisation cannot be enforced purely within Bitcoin itself.
Limitations of Bitcoin
No transaction introspection: Bitcoin cannot inspect transaction details at execution time, making real-time collateral verification impossible at the base layer.
Lack of complex arithmetic: Opcodes like OP_MUL and OP_DIV are not supported, as they were removed by Satoshi alongside other non-standard operations.
As a result, the logic required to track the relationship between locked BTC and issued UNIT must be enforced off-chain.
The MPC System Solution
To overcome these limitations, Ducat uses a Multiparty Computation (MPC) system. It is operated by independent participants external to the protocol. Their responsibilities include:
Custodying a share of the FROST key: Each actor holds a portion of the key required to co-sign vault transactions.
Processing user requests: Ensuring that every transaction complies with protocol rules as defined in the Master Canonical Reference Set (CRS).
The 2-of-2 Multisig Structure
All BTC collateral is secured using a 2-of-2 multisig scheme:
Key 1: Held by the user
Key 2: Distributed across the FROST-based MPC network
Benefits of Scriptless Multisig via FROST
Signer rotation: Participants can be replaced without affecting the validity of previously co-signed transactions
Resilience against malicious actors: Signing power is decentralised across multiple parties
Improved security: The threshold structure ensures that a high number of participants must collude for any compromise to occur
This system represents a significant improvement over traditional scripted multisigs, offering greater flexibility, security, and resilience.
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