FAQ
What are Bitcoin Collateral Vaults?
Bitcoin Collateral Vaults let you borrow stablecoins against BTC while your collateral stays in a dedicated vault on Bitcoin. There is no wrapping or bridging of your BTC.
They are Zest Protocol’s flagship product, bringing its mission to life: turning Bitcoin from an idle asset into productive capital. Read Introducing Bitcoin Collateral Vaults for the full story.
What can I borrow?
You borrow stablecoins from a connected lending market. The demo uses USDC on Ethereum. Your BTC remains on Bitcoin; Ethereum is where you receive and repay the USDC loan.
ETH is used to pay Ethereum transaction fees.
Who controls my BTC?
Your Bitcoin key is one side of the vault’s lock. The protocol’s distributed signing key is the other. Protocol operators cannot create a new spend without your authorization.
You authorize permitted liquidation transactions in advance, with fixed amounts and destinations. Independent guardians review the resulting settlements and can reverse invalid payouts during the contest window. These protections work together: customer authorization limits what can be spent, and guardian oversight checks whether settlement is justified.
Read How it works and Guardian protection.
Is my BTC pooled with other borrowers’ BTC?
No. Each position is tied to its own Bitcoin vault. Your BTC is not pooled or commingled with other users’ BTC.
Is this a wrapped Bitcoin product?
No. The collateral stays on Bitcoin. A record on the destination chain represents your specific vault for lending purposes. It is an accounting representation, not a freely tradable wrapped BTC token.
How much can I borrow?
Your borrowing capacity depends on your collateral’s value, the market’s maximum loan-to-value ratio (LTV), your existing debt and available liquidity. The position must also have the required settlement authorizations in place before additional borrowing.
The liquidation threshold is separate from the borrowing limit. Exceeding the borrowing limit does not by itself mean your position can be liquidated. See Borrowing and repayment.
Can I repay part of my loan?
Yes. You can repay part of the USDC balance and keep the rest of the loan open. Partial repayment reduces your debt without requiring a Bitcoin transaction or a new Bitcoin signature first.
Repayment and withdrawing BTC are separate actions. After repayment, you can request a withdrawal if the remaining position meets the lending requirements.
Can I withdraw some BTC without closing my loan?
Yes, provided the remaining collateral supports your debt and has the required settlement protection. A partial withdrawal sends the requested BTC to you and keeps the remainder in a Bitcoin Collateral Vault.
You authorize the updated transactions for the remaining position before the withdrawal is ready to broadcast. See Partial withdrawals.
What happens during a partial liquidation?
A transaction you authorized in advance allocates the specified BTC amount toward liquidation. The remaining BTC stays in a vault on Bitcoin, backing the continuing position.
Amounts and destinations are fixed when you sign. Guardian protection applies to the settlement payout. See Partial liquidations.
Do I need to stay online?
You do not need to be online to sign an already-authorized liquidation transaction again. The protocol can execute it when the corresponding conditions are met, subject to guardian oversight.
You should still monitor your borrowing position and complete any required authorization updates. See Keeping coverage current.
How do guardians protect my position?
The Guardian Council independently checks settlements against the lending position. If a payout is invalid, the required guardian quorum can return it to the prescribed vault during the contest window, before the recipient collects it.
The return transaction is authorized in advance. Guardians cannot change its destination to pay themselves. This protection relies on an honest, available guardian quorum able to intervene within the window. See Guardian protection for how it works.
What if Zest Protocol’s services or the destination chain go offline?
BTC that remains in an eligible unspent vault has a customer-only recovery path enforced by Bitcoin. After the vault’s timelock, you can recover it using your Bitcoin key, public vault information and sufficient transaction fees. No protocol signature or functioning destination chain is required for that path.
See Recovery for the applicable conditions and Verify your position for the public records to keep accessible.
Why do I sign more than once?
Your signatures authorize different actions, including funding the vault, its permitted liquidation transactions and protective return transactions. A later withdrawal can require updated authorizations for the remaining collateral.
The demo keeps liquidation coverage small: at most two customer signatures for each new liquidation grid. Funding, protection and withdrawal signatures are additional. Read What you authorize.
Which wallets can I use?
Use a wallet supported by the application’s onboarding flow. Bitcoin signing and Ethereum transactions have different wallet requirements; see Opening a vault for preparation and Demo status for the current integration details.
Your private keys stay in your wallet. Zest Protocol does not ask you to enter a seed phrase or private key into the webpage. Security explains connection permissions, signing and USDC approvals.
How long do deposits and withdrawals take?
They depend on Bitcoin confirmations, Ethereum finality and any settlement window that applies to the action. Bitcoin collateral movements do not complete instantly when you submit an Ethereum transaction.
See Protocol parameters for the applicable confirmation requirements and timing.
What fees do I pay?
Bitcoin transactions require BTC for network fees. Ethereum transactions require ETH for gas. Bitcoin settlement fees can be deducted from the collateral being spent, so review the amounts before signing.
Borrowing also accrues interest under the lending market’s terms. See Borrowing and repayment.
How does BitVM fit into Bitcoin Collateral Vaults?
The first phase combines customer-authorized transactions with independent guardian enforcement. BitVM is the next stage of the verification design, introducing cryptographic proofs of destination-chain events through a Bitcoin challenge protocol.
Read How Zest Protocol brings Bitcoin Collateral Vaults to mainnet for the two-stage rollout.
Have Bitcoin Collateral Vaults been audited?
Zest Protocol Bitcoin Collateral Vaults have been audited by Clarity Alliance . Read Security for audit information and the protections built into the product.
Where should I start?
Introducing Bitcoin Collateral Vaults explains the product. Opening a vault covers getting started. For a question about your position, see Getting help.