Bitcoin's Native Stablecoin Protocol
Pre-Seed | Q2 2026 | covenant.ac
"In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I'm sure that in 20 years there will either be very large transaction volume or no volume."
— Satoshi Nakamoto, 2010
We're sixteen years in. The volume hasn't come. The next halving is two years away. This isn't FUD. It's arithmetic.
$1.37 trillion in collateral. 0.46% generating any base-layer activity.
Every time a holder needs dollar liquidity, they leave Bitcoin. The fees go to Ethereum, Solana — whoever hosts the wrapped version.
Bitcoin excels at censorship-resistant settlement and long-term value storage. What it lacks is a native economy — a way to price, lend, borrow, and transact in stable terms without exiting Bitcoin's security model.
Need to pay electricity bills in stable currency → forced to exit Bitcoin
Need to price services without repricing hourly → forced to exit Bitcoin
Need predictable debt obligations → forced to exit Bitcoin
Stablecoin Market
Market Capture at 150% CR
A Bitcoin-native stablecoin where the collateral, the enforcement, and the settlement all live on Bitcoin's base layer. No bridge. No foreign execution environment. No custodial risk.
Every operation executes in a single Bitcoin transaction. All or nothing. No partial states. No stuck funds.
Your BTC stays on Bitcoin, in your control. Non-custodial Taproot vault scripts. Two spend paths: user-controlled + liquidation.
200% overcollateralized at mint. Liquidation at 150%. Deterministic — no auctions, no governance votes, no discretion.
Each vault is a Taproot output with an unspendable internal key. Script tree contains spending conditions for liquidation, redemption, and top-up. Collateral can only move under conditions verifiable by Bitcoin nodes.
cbUSD is a Bitcoin Rune — a token standard native to Bitcoin L1. Not an ERC-20. Not a wrapped asset. Inherits Bitcoin's full security guarantees and settles with Bitcoin's finality.
Lock BTC into a Taproot vault at ≥200% collateral ratio.
cbUSD is minted as a Rune on Bitcoin L1. Use for payments, trading, yield.
Burn cbUSD to unlock your BTC collateral. Atomic. Instant. No permission needed.
Add BTC to existing vault without minting new cbUSD. Improves collateral ratio.
Burn some cbUSD to reduce debt and improve CR. Partial burns supported.
Single atomic transaction — collateral lock and token issuance happen together. If either step fails, nothing happens. No partial states. No stuck funds.
All transactions settle here — Taproot vaults, Runes for cbUSD
Mint cbUSD · Redeem BTC · Top up collateral
Oracle MPC — FROST threshold sigs, 5 sources
Liquidation MPC — Separate key domain
Open Indexer — Anyone can verify
Restore vaults · Burn or Inject · Earn collateral at discount · Permissionless
If oracle cannot guarantee reliable price → halts price-dependent operations. Burns and redemptions remain available regardless. Users can always exit. No system condition can trap funds.
1 cbUSD = $1+ worth of BTC, always. Redemption is algorithmic, atomic, instant. Even when oracle halts, burns remain available.
Mint at ≥200% CR. Liquidation at 150%. If CR breaches threshold, debt is forcibly resolved. Deterministic — no auctions.
Peg deviation creates arbitrage. Premium? Mint and sell. Discount? Buy and redeem. Supply self-corrects through market forces.
Liquidation Incentive Curve
The deeper the stress, the more attractive the liquidation. Price-deterministic only.
Three Intervention Paths
Pay down vault debt directly. Most capital-efficient.
58% gross marginAdd fresh collateral to restore CR.
17% gross marginBoth in same TX. Flexible resolution for any participant.
| USDT | USDC | DAI | cbUSD | |
|---|---|---|---|---|
| Collateral | Off-chain fiat | Bank-held USD | ETH, RWAs | BTC on-chain |
| Custody | Centralized | Centralized | Smart contracts | Non-custodial |
| Transparency | Attestations | Attestations | On-chain | Fully auditable |
| Censorship | Freeze enabled | Freeze enabled | Governance risk | Bitcoin-level |
| Settlement | Issuer | Business rel. | Smart contracts | Atomic on-chain |
cbUSD: The first stablecoin with Bitcoin's security model.
✓ Vault contracts deployed on Testnet4
✓ Auction engine operational
✓ On-chain indexer live
✓ Atomic minting tested on Bitcoin Testnet4
✓ Wallet integrations (Xverse)
✓ Adversarial testing completed
○ Mainnet deployment pending audit
○ Security review in progress
○ Early user programs being structured
Protocol tech is complete and ready for mainnet deployment post-audit. All core operations — minting, redemption, liquidation — fully functional on testnet.
BTC-denominated per-mint protocol fee. Paid in same atomic TX.
Small exit fee on each redemption. Incentivizes long-term use.
15% on liquidated collateral, denominated in BTC.
Minters earn ~5% APY. Protocol deploys at 7–8%. 2–3% spread → revenue.
TREASURY MODEL
Every revenue stream is denominated in BTC. No governance token. No inflationary emissions. No ponzi yield.
Current architecture uses MPC-FROST for enforcement. As covenant opcodes activate on Bitcoin, enforcement migrates into Bitcoin script — removing discretionary layers until the protocol runs entirely on-chain.
Q1 2025 – Q1 2026
Core protocol development
Taproot vaults
MPC-FROST enforcement
Testnet deployment
Adversarial testing
Q2 2026
Security audit
Mainnet deployment
cbUSD launch
Early liquidity incentives
Wallet integrations
2027+
OP_CTV activation
OP_CAT integration
Full script enforcement
Multi-currency expansion
MPC removal
Upgrade path preserves existing vault positions while hardening enforcement at each phase. Not built on hypothetical future state.
The Covenant engine is currency-agnostic. Same vault architecture, same enforcement logic, different price feed. Each stablecoin backed by BTC, settling on Bitcoin L1.
Revenue Multiplier
Each new currency = new fee streams:
Minting fees · Redemption fees · Liquidation fees · FX swap fees (cbUSD ↔ cbEUR spread)
No other protocol offers multi-currency stablecoins, all backed by BTC, all settling on Bitcoin L1. Same audit. Same infrastructure. Marginal cost to add currencies.
Raising
$500,000
Valuation (pre-money)
$15M
Structure
SAFE
Use of Funds
Why Now
→ 2028 halving in <2 years — subsidy drops to 1.5625 BTC
→ Protocol tech complete — just needs audit
→ Testnet proven — all core operations functional
→ First mover — no BTC-native stablecoin at scale
→ BTC at ATH — demand for native liquidity at peak
Satoshi's transition plan was always fees.
Fees require volume.
Volume requires an economy.
An economy requires a stable unit of account.
Bitcoin has not had one that stays on its base layer.
That is the break in the system.
Covenant is building the infrastructure to close it.
COVENANT
covenant.ac
info@covenant.ac