Cross-chain communication requires a trusted third party, as the Fair Exchange problem is reducible to it. However, the decentralised consensus of blockchains can be used as a source of trust, and financial incentives can achieve security. XCLAIM uses these principles to enable collateralised cryptocurrency-backed assets to be created and used. However, full collateralization is inefficient, and to protect against exchange rate fluctuations overcollateralization is necessary. This is a significant barrier to scaling, and as a result, in practice, most systems still employ a centralised architecture.
In this work, we introduce XCC, an extension to the XCLAIM framework which allows for a significant reduction in collateral required. By making use of periodic, timelocked commitments on the backing blockchain, XCC decouples locked collateral from issued CBAs, allowing fractional collateralization without loss of security. We instantiate XCC between Bitcoin and Ethereum to showcase practical feasibility. XCC is compatible with the majority of existing blockchains without modification.
Category / Keywords: cryptographic protocols / interoperability, smart contracts, cryptocurrency-backed assets, Bitcoin, Ethereum Date: received 29 Jan 2022 Contact author: theodore at bug net Available format(s): PDF | BibTeX Citation Version: 20220131:075530 (All versions of this report) Short URL: ia.cr/2022/113