Sushi Partners with ZetaChain to Explore Native Bitcoin Swaps Across 30 Blockchains

DeFi platform Sushi has announced a partnership with interoperability platform ZetaChain to investigate the possibility of native Bitcoin swaps for its users across 30 different blockchain networks. This integration aims to enable trading of BTC without wrapping across multiple blockchains in a decentralized and permissionless manner.

The partnership will include the deployment of Sushi’s decentralized exchange (DEX) on ZetaChain, which will support Sushi’s v2 and v3 automated market makers as well as SushiXSwap, its cross-chain swap functionality.

Ankur Nandwani, a core contributor to ZetaChain, believes that this partnership can bring Bitcoin’s vast user base to the DeFi sector in a native way, contrary to arguments suggesting that bridging BTC without wrapping assets on another chain is impossible. He cites early examples like THORChain, which trades Bitcoin natively with other chain assets, as evidence that it can be done.

ZetaChain’s approach allows anyone to build Bitcoin-interoperable decentralized applications (DApps) that can settle contracts and transactions natively. However, Nandwani acknowledges that there are trust assumptions involved, particularly trusting the decentralization of the network conducting the cross-chain transactions.

ZetaChain has already tested the technology at a testnet level and plans to prove its utility through partnerships with SushiSwap and other DeFi protocols when it launches its mainnet. Jared Grey, the head chef of Sushi, sees this integration as a significant advancement for DeFi and describes the capability to swap Bitcoin natively as a “game-changer” for the industry.

The integration between Sushi and ZetaChain will occur in two phases. The first phase will introduce a DEX on ZetaChain’s testnet to support basic asset swaps and liquidity provision, along with beta testing and incentives for application testing. Sushi will become one of ZetaChain’s launch partners when it deploys its mainnet, which will be followed by full functionality for Bitcoin interoperability.

Nandwani explains the technical details behind the functionality that allows for native BTC cross-chain swaps. A cross-chain swap contract is deployed on ZetaChain’s Ethereum Virtual Machine (EVM), which can be called and receive value from any connected chain, including Bitcoin. Users initiate a cross-chain swap by sending a native token transfer transaction on Bitcoin with a special memo to a TSS address. The memo contains the omnichain contract address on ZetaChain and the destination token and recipient address on the destination chain.

The TSS address is owned by ZetaChain signer validators, and BTC transferred to this address is locked. Validators observe this transfer and cast votes, and if enough votes are cast, an inbound cross-chain transaction (CCTX) is created from Bitcoin to ZetaChain. Once a CCTX is processed, ZetaChain’s omnichain contract is called, and the BTC transferred to the TSS address is minted as ZRC-20 BTC.

During the cross-chain swap contract execution, ZRC-20 BTC is swapped for another token, such as ZRC-20 ETH. The ZRC-20 ETH is then withdrawn to the destination chain, with the ZRC-20 token burned and an outbound CCTX created from ZetaChain to Ethereum. Validator votes on the outbound CCTX, and once it is processed, native ETH is transferred from the TSS address on Ethereum to the recipient.

This example demonstrates how native BTC is swapped for native ETH in a decentralized manner facilitated by ZetaChain’s network validators across connected chains.