This isn’t quite how the process works. Minting happens only after a coin crosses the bridge, and is dictated by the smart contract code, which is deployed on-chain and uneditable. All minting is 1:1 for whatever coin is crossing the bridge. We see that you all like the privacy that Zcash offers, and this would be a great addition to avoid centralized exchanges, gain access to defi/passive income potential for your asset, and also keep exposure to the main ZEC price movement.
To your point, it is a one-way bridge, that’s the only way to keep it trustless. ZEC is held in permanent custody on the Zcash chain by removing it from circulation (actual code will be published in the grant proposal, which is yet to be submitted), this information, using an ethereum-based relayer (which side-by-side validates transactions with the main Zcash chain), “tags” the ZEC as out of circulation, provides with a QR code, which is then applied to the smart contract on the ethereum-side and mints vZEC on a 1:1 ratio as stated above. No person is interacting with your coins at all except you and code.
To your point in another comment, yes, sometimes the wrapped-ZEC on the ethereum side can fall below the price peg, and relies on arbitrage to buy up the lack, or sell the surplus. This is what we mean in our proposal (yes, still yet to be submitted), when we say we trade custodial risk (people owning a multisig, that you trust wont rug) for market risk (the market dictating price movement, but not coin ownership).
With a deep enough pool on the destination side, there will be minimal slippage, and you don’t have to sacrifice your privacy to a centralized exchange for wanting to move your own assets around to other parts of the cryptocurrency ecosystem.
Disclaimer: Yes, I’m on the team at Strudel. Hopefully this is viewed as informative and not shilling.
Interesting roadmap in your pitchdeck. If the “one-way” part is your big selling point here then why is it listed as a disadvantage there? How trustless will your stablecoin exchange be and how do you even position a dex as the market leader?
I’ll reply to the topic instead of individual posters since most of them are from Strudel.
vBTC is created 1:1 by burning BTC in a trustless fashion (I do not agree with this, but let’s accept it for the moment).
By burning BTC, vBTC has no collateral. Therefore its value is entirely market based. It is not related to BTC at all. It’s a minting mechanism which uses value (in BTC). In fact, it is not the first coin to operate in this fashion. I have no problem with that. However, I take issue in calling it (v)BTC. IMO it is an appropriation of a name with which vBTC has no further connection.
If you are going to say that the connection is the burning mechanism, let me give an anology.
Let’s say I have a machine that can automatically makes a Lambo token if one destroys a real Lambo.
Does that make the Lambo token worth a Lambo? Maybe in the eyes of the person who is willing to use the machine but probably not for a lot of other people.
After minting, you have a coin that, as you say, is subject to market pricing. The point of vBTC holding a peg because of arbitrage does not stand. For arbitrage, you will need two paths of reaching the same goal which differ in value at no risk (I simplify). For example getting ETH through BTC vs ETH directly: ETH/BTC * BTC/USD = ETH/USD. Without a way to turn vBTC back to BTC, there is no arbitrage.
You said vBTC/wBTC is the way out. This is also based on trading and there is no guarantee of having 1:1. It could be 10000000:1, or 1:1000000. I doubt it will maintain a peg since wBTC lets you get out in BTC.
Arbitrage: I get vBTC through your bridge and turn it into wBTC. I got the trustless setup through vBTC and now I have wBTC that I can redeem for BTC. I got that option for free essentially.
You may say, what about other algorithmic stablecoins? Well, there is collateral. If the value goes down, they will automatically liquidate assets to maintain the peg.
How are you going to maintain the peg if people start to dump vBTC?
On the technical side, you say that the minting is trustless but it is your code and you can decide one day to mint more. No one can stop you.
IMO, the project is not financially sound. You do what you want. Investors in Defi should be aware of the risks.
However, I think there is a significant risk to the reputation of Zcash if it is associated with a project that goes under like $TITAN
Not in favor of funding this proposal. I also agree with @hanh that associating Zcash with less than sound projects is a liability. I hope @ZcashGrants can see what I and @hanh see from the responses given in this thread.
Hi @Squirtle, thanks for submitting your application to the ZOMG. The ZOMG met today and had a debate around the application.
Many of us like the idea of bridging ZEC to ETH. It’s the same reason we supported projects like the one that put renZEC liquidity onto new Binance Smart Chain AMMs. So we were pleased to see your application.
However, we have a few considerations as we think about our duty to the community:
(1) would this be a proven and reliable source of return for the community (in network effects, not so much direct financial impact)
(2) the size of the grant relative to our confidence on #1 and to our familiarity with the project owners
(3) how clearly we understand the mechanics, design and process of the project.
On balance, we feel that we have to decline this application for now. When your project has built a longer track record, we would welcome an application at that time.
I’m sorry we don’t have better news. Personally, I like the idea of trying new things (like what you’re doing), especially in DeFi. However, in our capacity as stewards of the ZOMG funds, we need to take a more conservative approach.
Hi, @ml_sudo. Your feedback is greatly appreciated. We understand your current hesitance towards our proposal. Hopefully in the future we’ll be able to revisit this as our project grows.
