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DLC.Link Wikipedia Page

dlcBTC

DLC.Link Wikipedia Page

DLC.Link Inc. is a US-based blockchain company. It’s building an infrastructure that provides developers with a secure and decentralized way to create smart contracts on the Bitcoin network.1 The company was founded in 2021 by Aki Balogh,2 the CEO and co-founder of MarketMuse26, and Jesse Eisenberg,3 a former software engineer at Pivotal Labs, MoPub, and Twitter. DLC.Link is based in Budapest, Hungary and North Andover, MA. 

DLC.Link has two business lines: commercial and community. The commercial line aims to bring Bitcoin to Ethereum via dlcBTC safely.4 The company’s commercial strategy involves generating yield through participation in liquidity pools,5 such as Curve,27 where trading fees contribute to returns. Additionally, DLC.Link aims to generate yield by providing dlcBTC as collateral in lending pools, as demonstrated by platforms like AAVE.28

On the community front, DLC.Link seeks to enable protocols and chains to integrate its infrastructure, allowing them to create their own DLC experiences. This extends to supporting activities like Ordinals trading,6 exemplifying the company’s commitment to fostering diverse and customizable decentralized finance (DeFi) activities on the Bitcoin network. 

History

To better understand how and why DLC.Link was conceived; it’s essential to study the significant milestones in Bitcoin’s development. 

On October 31, 2008, Satoshi Nakamoto (the pseudonymous creator of Bitcoin) published a whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,7” describing the concept and technical aspect of Bitcoin. Afterwards, on January 3, 2009, Nakamoto successfully mined the genesis block of the Bitcoin blockchain, officially marking the birth of Bitcoin. 

Since then, Bitcoin has drawn the attention of developers and the business community.8 As the word spread, more people accepted Bitcoin and started creating ecosystem use cases around it. The use cases, broadly classified into Bitcoin trading and mining, included cryptocurrency exchanges and wallets, integrated circuits, and application software.  

Apart from mining and trading solutions, developers started to explore building more practical use cases on the Bitcoin blockchain but faced technical bottlenecks inherent to blockchain technology. The limitations are summarized in the blockchain trilemma,9 a challenge in building a blockchain system that concurrently meets decentralization, security, and scalability needs. 

Among the three characteristics, decentralization and security are more critical. As such, developers have made more efforts to scale the Bitcoin blockchain. Until now, the protocol has undergone two major technical upgrades, crucial in ensuring the thriving Bitcoin ecosystem we see today.  

Segregated Witness (SegWit) 

SegWit was the first major technical upgrade of the Bitcoin protocol designed to make it scale faster.10 It changed how Bitcoin data is stored by separating transaction data from witness data. SegWit was intended to prevent non-intentional Bitcoin transaction malleability and allow more transactions to be stored per block. 

Taproot Upgrade

Taproot was the second major Bitcoin technical upgrade. It was designed to enable the Bitcoin protocol to batch several signatures and transactions, making it easier and faster to confirm transactions on the blockchain. Besides, it modified transactions with single and multiple signatures, making identifying transaction inputs on the protocol hard.12  

Taproot included three main Bitcoin Improvement Proposals (BIPs)11:

  • BIP 340 (Schnorr Signature) – implemented a smaller, more secure, and flexible cryptographic signature.12 

  • BIP 341 (Taproot) – made intelligent contracts appear externally indistinguishable from regular transactions, improving privacy. In addition, it minimizes transaction sizes, thereby reducing transaction fees. 13

  • BIP 342 (Tapscript) – updated Bitcoin protocol’s Script language to put up with Schnorr signatures and Taproot technology. 

These two technical upgrades brought significant advancements, such as higher efficiency, better privacy, and the flexibility to build smart contracts on the Bitcoin network. Essentially, Schnorr signatures and Taproot BIPs formed the foundation of Discreet Log Contracts (DLCs) – invented at MIT by Thaddeus Dryja14. DLCs are like a 2-to-2 multi-sig wallet that leverages an attestation layer to observe activities and confirm transactions.15 

Moving Bitcoin with Code – Not Trust

Though Bitcoin is the largest cryptocurrency by market capitalization, it can’t be used in DeFi directly. To use Bitcoin on other networks, users rely on custodian banks and crypto bridges to mint synthetic assets, such as wrapped Bitcoin (wBTC).16 

Wrapped tokens lock Bitcoin deposits with custodians or use smart contracts to mint synthetic versions on other networks. However, custodial wrapping and bridging of Bitcoin compromise the user’s self-sovereignty, privacy, and security – fundamental ideologies that form Bitcoin ethos.17 Moreover, custodian failures and bridge hacks have resulted in losses exceeding $140 billion to date.18  

DLC.Link implements DLCs to enable Bitcoin holders to use native Bitcoin in DeFi without exposing themselves to custodial and bridging risks.29 The platform trustlessly locks Bitcoin on-chain, from where it can be used on other chains, like Ethereum.19 

dlcBTC

Recently, DLC.Link announced its first commercial product, dlcBTC, an innovative solution that securely moves native Bitcoin with code to other chains.20 The product will go live in early 2024 and help Bitcoin holders seamlessly interact with popular DeFi applications, like Curve and AAVE, without needing custodians and intermediaries. 

DLC.Link’s infrastructure enables users to lock their Bitcoin deposits into a DLC to mint dlcBTC. A DLC is a 2-of-2 multisig unspent transaction output (UTXO) where users retain one key. This innovative model safeguards Bitcoin deposits using the full Bitcoin network hashrate.21

Moreover, the payout addresses are predetermined and locked at the deposit stage. This implies that in the event of a security breach, the attackers cannot redirect or drain the deposits, making dlcBTC a “theft-proof” Bitcoin scalability solution. 

Traditional crypto bridges lock deposits into validator networks and keep them in multiple pools/wallets. Contrary to this, DLC.Link’s Attestor model performs the DLC locking mechanism without taking control of users’ keys or deposits.22 

As such, dlcBTC is thought to transform how Bitcoin is used in the DeFi landscape. Unlike other standard bridges, dlcBTC provides a secure and impenetrable solution that preserves the purity of user sovereignty and eradicates the common risks associated with custodial bridges. 

Funding

In October 2022, DLC.Link announced it had completed a $2 million pre-seed investment round.23 The investment round was headed by ABCDE Capital, established by a Huobi co-founder, and Comma 3 Ventures.30 31

DeFi funds Bixin, Contribution Capital, AlphaDAO, and DeSpread were the other investors. Bitcoin mining-focused firms like New Layer Capital, SBX, Gossamer, and Waterdrip also participated in the funding.32 33 34

DLC.Link received strategic contributions from Chainlink, Stacks Foundation and Trust Machines. Chainlink was DLC.Link’s first investors through their foundation’s grant program.24 Stacks Foundation then awarded DLC.Link their maiden Partner-level grant.35 

Angel investors, including Charlie Songhurst (a Bitcoin whale and super-angel), Matt Barby (DeFi expert and podcaster), Saeed Al-Zaabi (formerly Director at the General Secretariat of Abu Dhabi) and Kieran Flanagan (CMO of Zapier) also participated the funding round through Sequoia Scout.36

Moreover, multiple accelerator programs have supported DLC.Link’s growth, including Chainlink for Start-ups, Bitcoin Frontier Fund, Creative Destruction Lab, GSD Ventures, and Interchain Builders. 25

References

  1. Kharif, Olga; Leising, Matthew. Bitcoin and Blockchain. Bloomberg. January 6, 2015. Retrieved on January 02, 2024.

  2. The Silicon Review. Creating High Quality and High-Ranking Content through the Use of A.I: Aki Balogh, CEO, and Co-Founder of MarketMuse. Retrieved on January 02, 2024.

  3. LinkedIn profiles. Jesse Eisenberg profile. Retrieved on January 02. 2024.

  4. Roy, Meher. Aki Balogh: DLC.Link – Self-Wrapped Bitcoin (dlcBTC). Epicenter Episodes. December 16, 2023. Retrieved on January 02, 2024.

  5. Weisenthal, Joe; Alloway, Tracy. Transcript: Aaron Lammer on Yield Farming, DeFi, and Ethereum. Bloomberg Odd Lots Episode. May 21, 2021. Retrieved on January 02, 2024.

  6. Team, TM. The Future of Ordinals and DLCs: A Q&A with DLC.Link. Trust Machines. March 31, 2023. Retrieved on January 02, 2024.

  7. Nakamoto, Satoshi. Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin.org. October 31, 2008. Retrieved on January 02, 2024.

  8. Castillo, Michael. ‘The Rise and Rise of Bitcoin’ star talks about crypto entrepreneurship. The Business Journals. October 3, 2014. Retrieved on January 02, 2024.

  9. Shukla, Sidhartha. The ‘Blockchain Trilemma’ That’s Holding Back Crypto. Bloomberg. September 07, 2022. Retrieved on January 02, 2024. 

  10. Dreyfuss, Gertrude. Explainer: Bitcoin goes through major upgrade. Here is what it means. Reuters. November 15, 2021. Retrieved on January 02, 2024.

  11. Github Community. All Bitcoin Improvement Proposals (BIPs). Github. Retrieved on January 02, 2024.

  12. Bambysheva, Nina; Cuen, Leigh. How the Bitcoin Ecosystem Works. Forbes. March 09, 2023. Retrieved on January 02, 2024.

  13. Kharif, Olga. “Bitcoin to get more privacy features in Taproot update, making it harder to trace payments”. Bloomberg. Retrieved on January 02. 2024.

  14. Dryja, Thaddeus. Discreet Log Contracts. MIT Digital Currency Initiative. October 2017. Retrieved on January 02, 2024. 

  15. Glasbergen, Gert-Jaap. Discreet Log Contracts: Invisible Smart Contracts on the Bitcoin Blockchain. Medium articles. June 30, 2018. Retrieved on January 02, 2024.

  16. Shimron, Leeor. Bitcoin is Invading Decentralized Finance on the Ethereum Network. Forbes. May 16, 2020. Retrieved on January 02, 2024.

  17. DLC.Link blog post. The Security Benefits of DLCs vs. Bridging or Wrapping. April 06, 2023. Retrieved on January 02, 2024.

  18. Yaffe-Bellany, David. The Crypto World is on Edge After a String of Hacks. The New York Times. September 28, 2022. Retrieved on January 02, 2024.

  19. Free eBook. Bitcoin’s Safe Alternative to Wrapping or Bridging. DLC.Link. October 10, 2023. Retrieved on January 02, 2024.

  20. Epicenter Podcast. Aki Balogh: DLC.Link – Self-Wrapped Bitcoin (dlcBTC). Ep. 526. YouTube. December 15, 2023. Retrieved on January 02, 2024. 

  21. SmartCom. 2022. DLC.Link: The Smartest Way to Move Native Bitcoin. May 05, 2022. Retrieved on January 02, 2024.

  22. Choice. Getting to the Bottom of Discreet Log Contracts. YouTube. October 21, 2022. Retrieved on January 02, 2024.

  23. DLC.Link Blog Post. DLC.Link Completes $2Mn Pre-Seed Investment Round. Website. October 02, 2023. Retrieved on January 02, 2024.

  24. Chainlink. DLC.Link Receives Chainlink Community Grant to Bridge Chainlink Oracle Data to Discreet Log Contracts (DLCs) on the Bitcoin Network. December 24, 2021. Retrieved on January 02, 2024.

  25. GSD Venture Studios. GSD Labs Launches 10th Cohort with 12 Startups to #Go Global. August 8, 2022. Retrieved on January 02, 2024.

  26. MarketMuse website. Retrieved on January 03, 2024.

  27. Curve Resources. Understanding Curve (v1). Retrieved on January 03, 2024. 

  28. Hub. AAVE Document Hub. Retrieved on January 03, 2024.

  29. DLC.Link Blog Post. Components of DLC.Link. April 06, 2023. Retrieved on January 04, 2024.

  30. Medium blogs. ABCDE: Why Why Invest in DLC.Link? November 27, 2023. Retrieved on January 04, 2024. 

  31. Comma 3 Ventures. Portfolio. Retrieved on January 04, 2024. 

  32. PitchBook. SBX Capital Overview. Retrieved on January 04, 2024.

  33. Unicorn Nest. Gossamer Capital. Retrieved on January 04, 2024.

  34. New Layer Capital. New Layer Capital Invests in DLC.Link’s $2Mn Pre-Seed Round. Retrieved on January 04, 2024.  

  35. Topalian, Claire. Builder Spotlight: DLC.Link. August 01, 2022. Retrieved on January 04, 2024. 

CrunchBase. Sequoia Scout. Retrieved on January 04, 2024.

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