Zest Protocol has launched a mainnet demo of its Bitcoin Collateral Vaults, allowing users to deposit native Bitcoin into self-custodial Taproot vaults on the Bitcoin blockchain while borrowing USDC on Ethereum. The demo represents a live version of the system ahead of a wider production release.
Bitcoin deposited into Zest vaults remains on the Bitcoin blockchain in self-custodial Taproot vaults and is never wrapped or bridged to Ethereum. A corresponding collateral record is represented on Ethereum, where smart contracts handle USDC borrowing. The current demo caps collateral at 0.001 BTC per wallet.
Self-Custody and Pre-Authorized Paths
Every permitted destination for BTC is signed by the depositor when the vault is created, preventing operator redirection. Upon loan repayment, the pre-authorized path returns BTC to the user. If a position falls below required collateral level, only the liquidation portion can move to a registered liquidator.
The architecture is being designed around BitVM verification to allow Ethereum lending events to be proven back to Bitcoin with fewer trust assumptions. This approach differs from traditional Bitcoin-backed lending, which has required holders to hand coins to custodians, wrap them, or use bridges.
Cross-Chain Mechanics Without Wrapping
The protocol enables borrowing against Bitcoin collateral without requiring users to wrap their BTC or use bridge protocols. Collateral remains under the depositor’s control throughout the loan lifecycle, with cryptographic authorization determining liquidation scope and repayment routing.
