Safe Network Digital Bearer Certificates (DBC) could be used to manage and transact many kinds of asset not just Safe Network Tokens (SNT). We’ve already had some discussion of NTFs and I think other cryptocurrencies but I haven’t realised the extent of this and how easy and powerful it could be.
If used with other cryptocurrencies such as Bitcoin, those currencies would then benefit from Safe Network’s instant, energy efficient, scalable and effectively anonymous transfers. That’s great, but even better:
- this can be achieved without having to connect to other cryptocurrency networks or integrate Bitcoin etc. full nodes within Safe Network.
- very little extra code would be needed because DBCs are already doing most of the work for SNT. I’m pretty damn sure I’m not the first to think of this, not least inside MaidSafe, but I haven’t seen it spelled out (or maybe I’m just slow ) so here I go!
Example using Bitcoin (now the national currency of El Salvador).
Extra functionality we would need to implement:
- create a Bitcoin wallet (keypair) on behalf of a Safe account where Safe Network stores but does not reveal the private key. (Maybe this uses bitcoin multi-sig addresses and the private key is split between section Elders).
- management of the wallet using a DBC which allows the owner (who never sees the secret key) able to transfer ownership of the (whole) wallet to another Safe ID.
- ability to obtain the secret key from the DBC, invalidating the DBC, so the Bitcoin private key can be used as normal outside Safe Network.
This creates a proxy for ownership and transfer of bitcoin wallets (or any other kind of crypto wallet) over Safe Network without any interaction with the bitcoin network itself. The owner of the bitcoin wallet is the Safe Network, which obscures the actual owner, and hides the ownership history of the wallet.
- Anyone can check wallet Bitcoin balance using the public address, and can send bitcoin to it independent of Safe Network as normal.
- Ownership of the wallet can be transferred between Safe accounts and a recipient can check that they are the owner, and know they now control the Bitcoin in that wallet.
- Settlement can be achieved (but will rarely if ever be needed) by the Safe owner obtaining the private key for the Bitcoin DBC, which in turn invalidates the DBC. They can then import the bitcoin address into any bitcoin wallet, and it no longer exists on Safe Network.
None of this requires Safe Network to have a gateway to or any kind of interaction with the Bitcoin (or other cryptocurrency) network. All it needs to be able to do is generate and store the Bitcoin wallet keypairs and manage ownership using DBCs.
People can wrap any amount of bitcoin like this and transfer it as if it were SNT (but not split it). So if there’s 1BTC in the wallet you can transfer 1BTC but not 0.5BTC. The amount can be increased at any time outside Safe Network though, by sending additional BTC to the wallet. So if it has 0.001 BTC and you want to make it 0.01 BTC you can send the difference to top it up as a normal BTC transaction. It will remain there until you or some future owner decide to invalidate the DBC and obtain the private key for import into some Bitcoin wallet software or create a transaction directly using the key.
I’m not sure if this was apparent to others, but the full implications are only just occurring to me!
The above is not quite wrapped Bitcoin as we’d expect it, since wrapped coins can be moved in any amount, not just as a whole wallet.
Good news is that I think Safe Network can do this too, because we can create a Mint for SNT we should be able to create a Mint for a wrapped amount of anything, including Bitcoin, and then transfer fractions of this (or rather ownership of those fractions) between Safe accounts. I think this may have already been stated but don’t know exactly where.
For example: Carol uses SN to create a DBC with 1BTC in it and uses this to create a Mint with denominations of one millionth of a BTC. She can now send any fraction of this BTC to other Safe accounts in denominations of 1 millionth of a BTC up to a total of 1BTC.
I’m not sure how settlement can work in this case, and without that we have lost fungibility as Bitcoin. We have though created a potentially more valuable new fungible class of minted Bitcoin proxy coins, in whatever denominations the Minter chooses. More valuable because of speed, energy efficiency, transaction cost, scalability and anonymity.