Trustlex

Trustlex is a decentralized cross chain, non-custodial Bitcoin exchange protocol which can be used to exchange Bitcoin with assets on the other chain(eg: Ethereum, Avalanche C-Chain or other EVM compatible chains)

How it works

There are two smart contracts

1. BitcoinSPVChain contract is an incentivised contract where any user can submit new Bitcoin block headers in return for SPVC tokens. For more details on SPVC tokens see the Tokenomics section
2. Swap contract is deployed per asset pair (eg: BTC-ETH) and serves as an order book.

• Step 1: A ETH holder can post their order(eg: Sell 100 ETH for 10 BTC) and also provide their BTC address to the contract.
• Step 2: A Bitcoin holder wanting to swap Bitcoin for Ethereum can send Bitcoins to the specified address by the user
• Step 3: The Bitcoin holder posts merkle proof of transfer to the swap contract and withdraws ETH if the block has been confirmed and the transaction is included in the block to withdraw ETH from contract.

Tokenomics

BitcoinSPVChain contract mints and allocates SPVC tokens to the block submitter. This is done to incentivise block submission to the contract. The token is used as a pass by users of the swap contracts. The users of swap contract can either submit blocks to gain tokens to be used during swap process or they can acquire tokens from an existing holder.

Initial reward starts at 50 SPVC per block, and each month the reward reduces by half, until the contract issues 0.01 SPVC per block, and subsequently there is no halving and the contract issues 0.01 SPVC perpetually to every new block confirmed. Initially the reward is higher to encourage submission of new Bitcoin blocks to the contract, subsequently if there are many users of the swap contract, the assumption is that at least one person wanting to swap will submit the new blocks.

Security

Accidental Reorgs

• If there are block reorgs happening inside the confirmation window of 6 blocks, the contract handles it gracefully.
• If there are block reorgs happening after a block has been confirmed, the contract increases the time to confirm a block. Subsequently when the fork has resolved, the confirmation time is decreased by the contract. The minimum number of confirmations set by the contract is 6. The dapp using the contract should take into account the number of confirmations to enable / disable fund locking mechanism. The contract also rewards 20 times the current reward for users notifying of any forks.

Hardforks

• The contract doesn't currently handle hardforks. The proposed solution is to fork a new Relay contract by the token holders.

Previous work on Bitcoin SPV on Ethereum and how trustlex is different

1. BTCRelay (https://etherscan.io/address/0x41f274c0023f83391de4e0733c609df5a124c3d4)
   • First attempt at implementing a SPV relay for Bitcoin
   • Implemented using Vyper
   • Didn't have an incentive model for those who submit blocks.
   • Abandoned project
2. Summa-tx / tBTC OnDemandSPV
   • Implemented SPV based swaps (Summatx)
   • tBTC has a relay contract operational for the past two years(https://etherscan.io/txs?a=0x1531b6e3d51bf80f634957df81a990b92da4b154&ps=100&p=6)
   • There is only one user maintaining the relay. This is because there is no incentive for anyone to submit the block headers to the contract.
   • To avoid reorgs the relay maintainer has to explicity checkpoint through markNewHeaviest function whereas on trustlex the reorgs are one automatically by increasing / decreasing confirmations.
   • TBTC system is currently using StatelessSPV and not OnDemandSPV.
   • The OnDemandSPV contract does have the block headers for the past two years, but the contract doesn't expose public methods to verify transaction inclusion proof, so has limited utility. It does have an event driven approach where indexers can provide proof of a transaction and that will be relayed, but this still needs to be tested for gas efficiency as no one is using this contract yet as the TBTC system is using Stateless SPV proof.
   • TBTC-v2 are working on a Light version of their relay(https://github.com/keep-network/tbtc-v2/tree/main/solidity/contracts/relay). There is scope for collaboration here with them
3. Interlay
   • Used some elements of summa-tx and BTCRelay
   • No incentive for those who submit blocks.
   • Dapps have to decide what is secure number of confirmations.
   • SPV project is abandoned and the team is working on their own chain for Bitcoin DeFi.
4. Trustlex
   • First attempt at incentivising those who submit Bitcoin block headers
   • Reasonable, but slightly higher gas consumption to submit block headers (which is 1 block every 10 minutes) due to
     • Incentivisation
     • Automatic handling of reorgs
   • Cheap verification for smart contracts.
   • Handles reorganizations differently compared to Interlay and Summa-tx by increasing / decreasing the confirmations(initially set to 6) instead of leaving that to dapps. Dapps only have to use the confirmation value to see whether the funds have to be locked for an extended duration due to lag in confirmation.
   • Rewards those who submit
     • New block headers (Rewards start at 50 SPVC per block header, reducing to 0.01 SPV per block header)
     • Forks (Rewards 15x of the current reward)
     • Governance action to resolve confirmations (0.5% supply is inflated and allocated to the contract that governed the update)