Zest Protocol Prepares to Launch USD Coin (USDC) Loans Through 'Bitcoin-Backed Vaults'

[Financial News] Zest Protocol is preparing to officially launch a service that allows users to borrow USDC, a dollar-pegged stablecoin, while keeping their Bitcoin on the Bitcoin network.
According to sources in the virtual asset industry on the 2nd, Zest Protocol is conducting a pilot of its Bitcoin layer 1 (L1)-based Bitcoin-backed vault ahead of its official launch. The protocol has been running a mainnet demo using real Bitcoin and USDC since the 23rd of last month, and plans to incorporate feedback from Korean users into the official service.
The Bitcoin-backed vault allows users to deposit Bitcoin in a dedicated vault on the Bitcoin network and borrow USDC against it. The Bitcoin remains on the Bitcoin network without separate wrapping or bridging, and the deposited Bitcoin is returned once the loan is repaid.
A separate vault is created for each user, and the withdrawal conditions are finalized when it is created. During the current pilot period, the collateral limit is capped at 0.001 Bitcoin per wallet.
Zest Protocol plans to lift the pilot limits after completing an external security audit and launch the official service with institutional partners. Repayment and liquidation settlements are currently verified by an independent verifier (guardian). The protocol plans to eventually switch to BitVM, a method that uses Bitcoin's existing functionality to verify externally computed results.
Taiko Onnashi, co-founder of Zest Protocol, said, "It is now possible to place real Bitcoin in a vault built on Bitcoin and borrow against it on the mainnet," adding, "We look forward to feedback from Korean users."
Meanwhile, in May 2024, Zest Protocol raised a $3.5 million seed round led by Draper Associates, with Binance Labs and Flow Traders also participating.

[email protected] Lim Sang-hyuk Reporter