non-technical FAQ

With an ever growing ecosystem of L2s and staking products for Bitcoin, protocols are competing for liquidity by offering altcoin yield. In order to chase such liquidity rewards, stakers give up custody with a centralised solution, which isn't an ideal product for a Bitcoin Hodler. For both retail and institutional users, regardless of their jurisdiction, changing the beneficial ownership of funds is unacceptable as it entails relinquishing control over their assets.

We refer to "control" as in Coin Center's definition here:

BitDSM enables creation of a non-ERC20 representation aka, "in-kind remap", of staked BTC liqudity across different protocols over to Ethereum's Defi ecosystem, without giving up control of the funds.

Q. Is BitDSM a layer 2 on Ethereum? No. BitDSM is not a layer 2 or rollup but has delegation contracts deployed directly on Ethereum L1.

Q. Is BitDSM a Layer 2 on Bitcoin?

No. BitDSM does not claim to be a Bitcoin layer 2 since it does not verify state transitions on Bitcoin.

Q. Is there a separate consensus/blockchain for BitDSM?

No. BitDSM neither operates on a separate consensus nor produce blocks off-chain.

Q. Is there a slashing risk to my funds?

This depends on the specific validation rules established by the application to which the user has delegated. If there are no slashing conditions defined by the application, there is no slashing risk.

Q. What does it mean for institutions to create in-kind remap?

Institutions can run a BitDSM node and secure their funds themselves, without interacting with a counterparty in the protocol.

Q. How will withdrawals work if I transfer the remapped BTC to a third party?

Value in a BitcoinPod is non-transferable.

Q. Is BitDSM an Eigenlayer AVS?

Yes. The operators eligible to co-sign on BitcoinPod address are Eigenlayer Operators who have opted into BitDSM.