DeFi platform Sushi has partnered with interoperability platform ZetaChain to explore the possibility of local Bitcoin exchange across 30 different blockchain networks for its users.
Sushi is deploying its decentralized exchange (DEX) on ZetaChain, which it says will enable BTC transactions without the need to span multiple blockchains in what the team describes as a “native, decentralized and permissionless manner.”
The integration will include Sushi’s v2 and v3 automated market makers as well as Sushi’s cross-chain exchange SushiXSwap.
ZetaChain core contributor Ankur Nandwani told Cointelegraph that this cooperation can bring Bitcoin’s huge user base into the DeFi field in a native way. He also countered some arguments that bridging BTC without wrapping the asset on another chain is impossible.
“There are already early examples like THORChain where they are doing Bitcoin transactions natively with other chain assets. Other approaches like Bitcoin sidechains are also providing a flavor,” Nandwani said.
He added that ZetaChain’s approach effectively allows anyone to build Bitcoin-interoperable decentralized applications (DApps) that can natively settle contracts and transactions.
“Of course, there is an assumption of trust — the decentralization of the network that is trusted to conduct cross-chain transactions.”
According to reports, ZetaChain has proven the technology at the testnet level and will prove its practicality when launching the mainnet through cooperation with SushiSwap and other DeFi protocols.
Sushi chef Jared Gray hailed the integration as a major advancement for DeFi and described the ability to natively exchange Bitcoin as a “game changer” for the industry.
“This is not just about increased liquidity in Bitcoin; this will start a new chapter in DeFi where we will see more practical use cases for interoperability and enhanced connectivity.”
The integration of Sushi with ZetaChain will be carried out in two phases. First, Sushi will introduce DEX on ZetaChain’s test network to support basic asset exchange and liquidity provision. This phase also includes beta testing and application testing incentives.
Sushi will be one of ZetaChain’s launch partners when it deploys its mainnet. Full functionality of Bitcoin interoperability is expected to be rolled out after launch. Nandwani outlined the technical details behind the feature that allows native BTC cross-chain swaps.
The cross-chain exchange contract is deployed on ZetaChain’s EVM (Ethereum Virtual Machine). The contract is chain-wide, meaning that when it is deployed on ZetaChain, it can be called and value can be passed to it from any connected chain, including Bitcoin.
Calling a cross-chain swap contract involves the user sending a regular Bitcoin native token transfer transaction with a special memo to a TSS address. The memo contains the full chain contract address on ZetaChain and the value passed to the contract. For cross-chain exchanges, the value will be the target token, such as ETH or USDC on Ethereum, and the recipient address on the target chain.
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The TSS address is the address owned by the ZetaChain signature verifier. BTC transferred to a TSS address are locked, and validators observe the transfer and vote on the event on ZetaChain. If there are enough votes, the event is considered observed and an inbound cross-chain transaction (CCTX, from Bitcoin to ZetaChain) is created.
Once the CCTX is processed, the ZetaChain ominchain contract will be called and the amount of BTC transferred to the TSS address will be minted into ZRC-20 BTC. During the execution of the cross-chain swap contract, one ZRC-20 BTC is swapped for ZRC-20 of another token, such as ZRC-20 ETH.
ZRC-20 ETH is eventually withdrawn to the target chain. During the withdrawal process, ZRC-20 ETH is burned and an outbound CCTX is created from ZetaChain to Ethereum. Observer validators vote for this CCTX on ZetaChain. Once the outbound CCTX is processed, native ETH is transferred from the TSS address on Ethereum to the recipient on Ethereum.
Nandwani provided this example outlining how to exchange native BTC for native ETH in a decentralized manner, facilitated by ZetaChain’s network validators across connected chains.
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