Harmony Building BTC Bridge With Community

Harmony is preparing to launch its native Bitcoin bridge with help from its community to increase the decentralization and robustness of the bridging solution. Following in the footsteps of Ethereum and BINANCE Smart Chain, external participation will happen via community members running external vaults for the bridge and receiving rewards. 

Vaults are vital components of the Bitcoin bridge and act as custodians of a user’s bitcoins to facilitate issuing the HRC20 wrapped bitcoins (1BTC). For it to work, the vault needs to be collateralized to prevent hostile behavior and secure the bridge. Those providing collateral locked by the vaults receive the 0.5% bridge fee paid by the users who select them as vaults to bridge their bitcoins to Harmony.

There is no limit on the amount of collateral (in ONE) that any vault can initially put down to take custody of users’ bitcoins and facilitate 1BTC issuing. However, vaults are expected to maintain a collateral ratio of 150% in terms of the dollar amount. 

Incentivize participation with bridge fees

Participation in vaults will be incentivized using bridge fees and staking as lures. The vaults receive a 0.5% bridge fee from users on every transaction. The vaults also receive grants to cover the infrastructure cost and staking rewards of their collateralized ONE tokens. 

An automated system is deployed to ensure that vaults are sufficiently collateralized at all times. If a vault’s collateralized ratio falls below the minimum threshold, the vault is issued a warning, and after a predefined period of time, the vault’s collateral will be liquidated. How much is liquidated will be detailed before the launch of the BTC Bridge.

Additionally, stakers of ONE are rewarded for the amount of collateral that they put in based on the average staking reward rate. The examples below assume ONE price of $0.34.

Collateral: 200,000 ONE 

Staking reward: 18000 annually (@9% APR) or 1500 ONE/month 

Dollar amount: $6120 per year or $510 per month.

In a nutshell, the more vaults there are in the system, the more BTC can bridge over, in turn bringing new traders and value to Harmony. However, at the launch time, Harmony requires participants to commit at least three months to claim the reward incentive.

A bridge to the future 

Currently, the collateral put down by vaults is solely managed by themselves. To reduce the burden on the vaults and encourage further community participation, Harmony plans to introduce a staking mechanism to the bridge, enabling delegators to stake their ONE tokens on behalf of vaults and receive a percentage of the reward and fee.

The vaults will collectively decide any future bridge changes under a governance mechanism, with the possibility of a bridge governance token airdrop to further incentivize and drive the adoption of the bitcoin bridge. 

Those wanting to learn more about the opportunity on Harmony can get complete details here

The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds ETH, BTC, AGIX, HEX, LINK, GRT, CRO, OMI, IMMUTABLE X, ENS, GALA, AVASTR, GMEE, CUBE, RADAR, FLOW, FTM, BNB, SPS, WRLD, ATOM, and ADA.

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