Trustless bridge linking Zcash to Ethereum blockchain

Community Grants Applications
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Hey guys! I’m part of a project called Strudel Finance. And in the coming days, we’re planning on submitting a proposal on Zcash Grant for funding of a trustless, Zcash to Ethereum bridge. We thought it would be a good idea to be active in the community forum as well.

Strudel Finance is the first and only one-way, trustless bridging protocol linking Bitcoin (BTC), Bitcoin Cash (BCH), and future assets to DeFi. Through the use of Strudel’s secure protocol, bridging, liquidity mining, multi-chain support (Ethereum, Polygon, and BSC), and index fund options are available, with plans to incorporate lending and collateralization options in the near future.

One of Strudel’s main value propositions is its 100% trustless bridges which eliminate the need for custodial control of assets seen in typical wrappers. Vitalik Buterin indirectly mentioned a need for this value prop in a podcast with Lex Fridman recently. If you have time, it’s 1:53:06 to 1:57:40 on the YouTube video.

Buterin also indirectly tweeted about the need for more security when bridging BTC. This reinforces and lays the groundwork for Strudel’s value proposition going forward as DeFi and the need for security continues to grow exponentially.

Not only is Strudel a bridging protocol, but we also aim to be a substantial source of value and passive income for investors. One of our recently implemented financial instruments is The Mare Imbrium Fund, a meticulously designed Balancer smart pool.

The Mare Fund is a low-risk, six-token, auto-balancing, and self-supporting index fund that gives exposure to three Strudel assets (vBTC, vBCH, and TRDL) with additional hedging and support provided by a stablecoin (oneVBTC), Ethereum, and a deflationary token (TWA). Investment of one asset (single-sided liquidity) provides demand for the other five tokens through arbitrage rebalancing inherent in these types of Balancer smart pools. The Mare Imbrium Fund was constructed to help support the market-driven peg prices of vBTC and vBCH and early returns have been positive. A pegged BTC and BCH are essential to fuel and grow our ecosystem, and all Strudel developments have that in mind.

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I have included our Strudel Guide and Mare Imbrium Guide below for your review as well.

Strudel Finance Guide: https: // strudel-finance. medium. com/ welcome-to-strudel-the-guide-fd6442a0f757)

[Mare Imbrium FAQ: https: // strudel-finance. medium. com/ strudels-mare-imbrium-fund-the-guide-ff7e00c5df60

Website: https: // strudel. finance/

Please let us know if you have any questions.

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IMO, Strudel Finance is an algorithmic hedge fund. I wouldn’t describe it as low-risk: you describe it as an index-fund and the value of three assets are synthetic. Just look at the collapse of recent algo “stablecoins” to see the issue with that.

Also, name dropping Vitalik Buterin is strange. He did not mention your fund but the need for more security.

Obviously, this is only my opinion, but this grant is a request for investment in a fund.

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Hey @hanh, thanks for your comment. All opinions are welcome including yours(!)

To be clear, The Mare fund is just one facet of the project. Yes, you can invest and receive rewards/returns. But more importantly, it will help in maintaining vBTC’s peg.

Since this is our first interaction with the community, I figured it would be best to give a comprehensive overview of the project. I think you may have misread the part regarding Vitalik. He mentioned a need for what our project primarily does, which is trustlessly bridging assets.

What we’re specifically requesting funding for relates to the trustless bridge between Zcash and Ethereum we’re planning on building. Currently we have BTC-vBTC, BCH-VBCH, and are now exploring the idea of ZEC to vZEC.

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How did you do the trustless bridge between BTC and vBTC? Please spare no technical details.

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Take a look at this medium article (more technical) first:
https: //strudelfinance. medium.com/ bridging-btc-into-defi-without-intermediaries-a869b5f784ce

Then read this one:

I’m not sure I can properly include imagery and diagrams so it’s better to just link both. But this should give a comprehensive explanation.

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How does someone get BTC back from vBTC?

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In that scenario, you can always exchange it for wBTC (example) and the like.

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Hmmm… That wouldn’t be 1:1.

If it is a bridge, it should be going both ways. 1 btc for 1vbtc and vice versa.

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If you create a two way bridge you are back to the problem with trustlessness.

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If I can’t come back from vBTC, I’m trusting it to keep its value.
It’s not trustless either.

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The BTC → vBTC bridge is most certainly trustless. Once an asset is transferred, it’s immediately locked/held indefinitely.

This video explains the bridge a bit:

As for getting ‘back’ to BTC. You could for example swap vBTC to ETH to BTC or swap vBTC for wBTC at a 1:1 ratio.

You’ve brought up a valid concern regarding vBTC maintaining its value. That’s where there is market risk. The long-term plan is for the market to support vBTC’s pegged state.

This is also explained in the Strudel guide (first link in my second post). Were you able to completely read through it? It covers everything in quite a bit of detail.

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Based on what is presented in the proposal and the responses provided to the questions regarding the project, I am not in favor of funding this proposal/grant.

Good luck!

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Ok. I have a proposal for you then. Send me 1 BTC and I will mint 1 hBTC. Actually, I will mint 10 hBTC. It’s a bargain.

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Hi @Squirtle welcome to the forums. Let us know if you have any questions about the Grant application process.

As you can see the community is very technical and attentive to how it’s funds are spent in projects. Opinions posted here may or may not reflect the opinions of the ZOMG.

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Hi @tokidoki, I understand your skepticism. But perhaps over time we can convince the forum that this bridge could be a useful tool for the community.

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Haha, I can see where you’re going with this :upside_down_face:

While vBTC is below the peg, it’s not favorable/profitable to ‘lock’ your BTC for it. But this also means that the supply of vBTC won’t increase until the peg is either met or exceeded. In this scenario, it’s recommended to buy vBTC with wBTC.

Yes, you’re essentially buying BTC at a discount, since you will be able to swap back to wBTC at 1:1. When vBTC is above the peg, it’s recommended to then bridge/lock your BTC for vBTC. Which mints more vBTC and will maintain the peg long-term.

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Hey @Shawn! Thank you. I’ll take this over complete silence any day. I’m glad the community seems to be active and concerned about where resources are used.

The plan is submit our proposal by early next week. It’s quite fleshed out and should properly address most if not all of the questions asked.

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I don’t think we’ve actually submitted the proposal yet. But I respect your opinion, though I disagree.

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It’s trustless in the sense that there’s no custodial control of your assets, which has long been a security risk despite the measures taken. Vitalik has been and still is concerned about this custodial control, and no doubt this risk will become more ever-present as DeFi continues to grow. It’s a serious concern. Strudel is on the forefront of this issue and is attacking this issue BEFORE it becomes a huge problem. We are ahead of the curve and visionary. Strudel is the first and only bridge WITHOUT intermediaries. There’s a market for this right now, and the market for this will only grow going forward. Strudel is able to do away with intermediaries in a unique way by pegging vBTC and vBCH through market dynamics, incentives, and internal support (Mare Fund, Uni v3’s concentrated liquidity, etc). We have thus traded custodial risk for market risk.

While using market dynamics and incentives to peg assets certainly isn’t easy, we will continue to build and develop towards this goal, hence becoming the safest bridging option in DeFi, and one with many options for substantial passive income as we continue to develop the utility of TRDL, vBTC, and vBCH. We are still a very young project, and recent developments are showing great early returns for pegging vBTC and vBCH. The Mare Fund, for example, has proven to provide a consistent source of buy pressure for vBTC and vBCH by taking advantage of arbitrage. I’d highly recommend reading the Mare Guide to learn more (linked below).

No, our assets are not pegged at the moment, but many of the reasons for that are simply because our early setup did not utilize TRDL liquidity to provide peg support. This has just changed with the Mare Fund and we will continue to develop towards our goal of achieving a sustainable market-driven peg. Our next development, incentivized concentrated liquidity for wBTC/vBTC, will deepen liquidity and strengthen the peg substantially. The market WILL realize that vBTC is approximately 1:1 at all times (and you’ll be able to swap back for BTC through wBTC). We’re building a self-reinforcing ecosystem.

You may look at Strudel now and see unpegged tokens, but this is a fairly recent development with our low microcap and the market downturn. We’re not fully developed yet. Our vision is long-term. All recent and future developments/goals have peg-support in mind. We truly believe increased exposure is much of what we need at the moment as all volume/liquidity goes straight into our self-reinforcing structure. Increased exposure for Strudel with a Zcash bridge will go a long way towards increasing the volume/liquidity Strudel needs by providing a whole new range of customers a path to DeFi.

So much more to share, but this is getting lengthy. I highly recommend reading the Strudel and Mare Guides and keeping an eye on us.

Strudel Guide: Welcome to Strudel: The Guide - HackMD
Mare Guide: Strudel’s Mare Imbrium Fund: The Guide | by Strudel Finance | Medium

Cheers!

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