Abstract

1. Introduction

1.1 Background

Bitcoin, as the first and most decentralized blockchain network, boasts a market cap exceeding $1 trillion and unparalleled security. However, Bitcoin's limited smart contract capabilities and DeFi ecosystem restrict vast amounts of BTC from participating in the thriving decentralized finance applications.

1.2 Limitations of Existing Solutions

1.3 SatsFlux Innovation

SatsFlux achieves a truly decentralized, secure, and efficient Bitcoin cross-chain bridging solution by combining the latest cryptographic technologies (Taproot, MuSig2, FROST) with economic incentive mechanisms. Our core innovations include:

• Decentralized BTC vault based on threshold signatures with no single point of failure
• Economic bonding mechanism: signer nodes must stake SatsFlux tokens, malicious behavior results in slashing
• Multi-chain routing layer: supports efficient sBTC flow across multiple blockchains
• Modular smart contract architecture: easy to integrate and extend to new blockchains
• Transparent governance mechanism: community-driven protocol parameter adjustments

2. System Architecture

The SatsFlux protocol consists of three core layers: the Bitcoin Vault layer, the Signer Network layer, and the Target Chain Smart Contract layer. These layers work together through cryptographic proofs and economic incentives to ensure system security and liveness.

2.1 Bitcoin Vault Layer

The Bitcoin vault is the core of the protocol, managed using Taproot addresses and threshold signature technology. All user-deposited BTC is locked in this multi-signature address and can only be moved when more than the threshold number of nodes (e.g. 15/21) in the signer network co-sign.

2.2 Signer Network Layer

A decentralized network of signer nodes monitors the Bitcoin blockchain, validates transactions, coordinates multi-party signatures, and interacts with smart contracts on target chains. Each signer node must stake SatsFlux tokens as economic collateral.

2.3 Smart Contract Layer

Each supported target chain deploys a standardized set of smart contracts responsible for sBTC token minting, burning, transfers, and state management. These contracts undergo rigorous audits to ensure fund security and operational correctness.

3. Bitcoin Vault

The Bitcoin vault is the core security component of the SatsFlux protocol. It uses Bitcoin's latest technologies—Taproot and threshold signatures—to achieve decentralized fund custody.

3.1 Taproot Advantages

3.2 Vault Address Generation

// Pseudocode: Taproot threshold address generation
function generateVaultAddress(signers, threshold) {
  // 1. Aggregate all signer node public keys
  const aggregatedPubKey = aggregatePublicKeys(signers)
  
  // 2. Create threshold script path
  const scriptTree = createThresholdScriptTree(
    signers, 
    threshold  // e.g.: 15-of-21
  )
  
  // 3. Generate Taproot address
  const taprootAddress = createTaprootAddress(
    aggregatedPubKey,
    scriptTree
  )
  
  return taprootAddress  // bc1p...
}

3.3 Security Mechanisms

4. Threshold Cryptography

Threshold cryptography is the core technology enabling SatsFlux's decentralization and security. We employ industry-leading MuSig2 and FROST protocols to achieve efficient threshold signatures.

4.1 MuSig2 Protocol

MuSig2 is a multi-party signature protocol for Schnorr signatures, particularly suited for Bitcoin's Taproot upgrade. It allows multiple signers to generate an aggregated public key and signature that appears on-chain as a single signature.

4.2 FROST Protocol

FROST (Flexible Round-Optimized Schnorr Threshold) is a threshold signature protocol supporting t-of-n configurations (e.g. 15-of-21), providing higher fault tolerance and decentralization.

4.3 Signing Process

5. Bridge Process

The SatsFlux bridging process includes two core operations: Peg-in (BTC → sBTC) and Peg-out (sBTC → BTC). Both are coordinated through threshold signatures and smart contracts.

5.1 Peg-in Process (BTC → sBTC)

5.2 Peg-out Process (sBTC → BTC)

5.3 Cross-Chain Transfer

SatsFlux supports direct transfer of sBTC between different target chains without returning to the Bitcoin mainnet.

6. Smart Contracts

SatsFlux deploys a standardized smart contract system on each supported blockchain, responsible for sBTC lifecycle management and cross-chain state synchronization.

6.1 Core Contract Modules

6.2 Security Features

7. Security Model

SatsFlux employs a multi-layer security architecture combining cryptography, economics, and engineering best practices to ensure protocol robustness and user fund safety.

8. Tokenomics

The SatsFlux token is the protocol's native governance and utility token, with a total supply of 500 billion tokens, used for staking, governance, and fee distribution.

8.1 Token Allocation

8.2 Token Utility

9. Governance

SatsFlux adopts a decentralized governance model where token holders can participate in key protocol decisions through proposals and voting mechanisms.

9.1 Governance Scope

9.2 Proposal Process

10. Roadmap

11. Conclusion