Nomic
Bitcoin to Cosmos, explained
What is Nomic?
Nomic is one of the most exciting layer-1 chains that will connect to the Cosmos network. The Cosmos network is an ecosystem of sovereign, natively interoperable application-specific blockchains built on top of the Tendermint consensus engine and by connecting different components of the Cosmos SDK. All these networks can freely communicate and exchange values between each other thanks to a common standard protocol called InterBlockchain Communication (IBC). This protocol allows even non-Tendermint based networks to communicate with the Cosmos ecosystem thanks to the so called peg zones. These are non-custodial layer-1 chains that enable communication with Proof of Work blockchains such as Bitcoin and Ethereum.
Nomic is what will enable BTC to be freely used across the Cosmos ecosystem.
How does it works?
Users can deposit $BTC inside the protocol in exchange for an IBC-compatible version of the same coin called $nBTC. After receiving this token, users will be able to use it across the Cosmos ecosystem to leverage DeFi tools. For example, they will be able to open a collateralized debt position backed by $BTC to borrow other tokens or to participate in the liquidity provision by depositing $nBTC inside LP pools.
Nomic chain will be secured from its native $NOM token that will allow validators, and their delegators, to earn both $NOM staking rewards and $BTC bridge fees.
You can start staking your $NOM from the Nomic’s staking page.
Another particularity of Nomic is that it will be the first IBC-compatible chain built without the standard Cosmos SDK. Nomic team has developed a new high-performance blockchain application framework called Orga.
Orga
Orga is a new deterministic state machine framework written in Rust that allows devs to build blockchain applications on top of Tendermint consensus. But, what makes Orga so beautiful?
100x performance improvement compared to the GO counterpart. Since Cosmos SDK blockchains’ throughput is limited by the application, this new framework allows for the creation of state-of-the-art products that can process more than 10K Transactions Per Second (TPS).
safety by design thanks to the Rust programming language and the 10x less code required to build an application.
You can explore and start building your own application with Orga following this Github repo.
How is Nomic different from other bridges?
Before explaining why Nomic is different from other bridges, we have to understand two key features related to security and cryptography.
Schnorr signature
The Schnorr signature is a digital signature scheme described by Claus Schnorr in 1989 and covered by a U.S. patent that expired in 2008. What characterizes this signature scheme is its simplicity and security given by the supposed intractability of the Discrete Logarithm problem. It is a more efficient alternative to the classical and commonly adopted Elliptic Curve Manipulation Signature Algorithm (ECDSA).
Thanks to the Schnorr signature, multisig scheme and batch verification can be easily leveraged.
Taproot
Taproot is one of the most important upgrades to the Bitcoin network aimed to improve users’ privacy. This soft fork, alongside transactions privacy, reduced commission and allows for the creation of more complex transactions.
Let’s try to dig deeper into the network changes introduced by this upgrade. Taproot is based on 3 Bitcoin Improvement Proposals (BIP):
BIP340: introduction of the Schnorr Digital Signature Scheme (SDSS) for allowing multisig performance improvement.
BIP341: it is based on a SegWit update aimed at increasing the amount of information that can be included in a transation. This is achieved with a script called Merkelized Alternative Script Tree (MAST). Thanks to this script, it is possible to only register the execution conditions on the public ledger, which increases the efficiency of the multisig adoption and complex scripts.
BIP342: it is an upgrade of the Bitcoin programming language Script to introduce the two previous BIPs.
Nomic bridge
Nomic is designed around a common network Bitcoin reserve. Every validator is a signatory of the reserve, which will be managed in a decentralized and democratic way in the Blockchain network through a reserve script.
Schnorr’s signatures will allow Nomic to have a common Bitcoin reserve managed by the entire validator set through multisig.
Taproot will allow Nomic to efficiently implement a reserve script scheme creating Bitcoin spending conditions for the fund reserve.
How will Nomic revolutionize DeFi?
By allowing BTC to be traded in a decentralized way across the Cosmos ecosystem, Nomic will foster the creation of new applications:
Stablecoins based on overcollateralized, low volatility, BTC reserves. We will be able to build a Cosmos-native stablecoin based on the DAI model but fully decentralized and censorship-resistant.
Smart contracts that can take advantage of the Bitcoin network without modifying the original Bitcoin protocol.
A new kind of layer-1 Cosmos chain that leverages a mixed Proof of Stake (PoS) - Proof of Work (PoW) security.
Consider supporting our work staking with us. Let’s decentralize the world together!