Peg IN/OUT Process

Trust-minimized mechanism to move assets between the Bitcoin Network and the Zulu Network.

Moving Assets in and out of Zulu Network

Pegging assets in and out of Zulu Network involves locking a specific amount of BTC assets on the Bitcoin network and subsequently issuing wrapped BTC and zBTC on the Zulu platform.

TLDR here.

This process is subject to several requirements:

1. Locked BTC assets must remain non-transferable. There are centralization risks associated with both single and multiple signing methods.

2. Zulu must incorporate a Bitcoin SPV Client to verify the confirmation of specific transactions on the Bitcoin network.

3. Zulu's SPV Client must recognize the existence of Bitcoin and verify the occurrence of specific transactions on the Zulu platform. This functionality will be implemented based on BitVM.

The complete process of Pegging IN/OUT is visually illustrated below:

Fig 4. Peg IN/OUT Process

Zulu Peg IN/OUT Process in Detail

1. Alice initiates a Peg-In process with 100 BTC while simultaneously endorsing an n-n transaction, utilizing the Mulsig2 signature algorithm, where n represents the number of challengers in the network.

2. The signed transaction outlines the inputs and outputs, ensuring that the Peg-In output UTXO can no longer be spent in any other form.

3. At this point, Alice receives 100 zBTC on Zulu as a result of the Peg-In.

4. When Alice decides to Peg-Out, she initializes a Burn transaction on Zulu.

5. Validate the legitimacy of the Burn transaction on BitVM. During this phase, the Operator transfers 100 BTC from their account to Alice. The Operator can be any one of the n participants.

6. Upon completion of the transfer, the Operator initiates a kick-off transaction, signifying the conclusion of the proxy expenditure. At this point, the Operator aims to trigger the PEG-OUT transaction, facilitating the transfer of their Peg-In BTC to Alice.

7. This request undergoes a challenge period of 6 months. If any verifier detects any irregularities in the Operator's actions, they can consume the connector output. This action prevents the Operator from initiating the PEG-OUT transaction the regular way.

Peg IN/OUT TLDR

The Peg IN/OUT process on Zulu allows locking a specific amount of BTC on the Bitcoin network and issuing equivalent zBTC on Zulu, involving a trust-minimized mechanism with BitVM technology for secure asset transfer between Bitcoin and Zulu​​.