Cross-Chain Arhitecture

This section describes how VSC interfaces with external blockchains, processes inbound transactions, manages vaults, and ensures security during cross-chain operations.

Interface with External Chains

VSC interfaces with external chains through a combination of:

• Blockchain light clients
• Zero-knowledge proofs (ZKPs)
• Threshold signature schemes (TSS)

These components enable VSC to operate trustlessly and without centralized custodians. This architecture removes the need for centralized custodians, allowing users to interact with external blockchains without relinquishing control of their assets.

Inbound Transaction Flow

Inbound transactions from external chains are processed as follows:

1. Relays monitor and index events or transactions on supported chains.
2. These transactions are broadcasted to the VSC network, where they are validated using the appropriate blockchain light client.
3. Once validated, the transaction triggers an operation on VSC, such as:
   • Minting a token
   • Executing a swap
   • Performing a contract call

This ensures external actions are securely mirrored within the VSC ecosystem.

Vault Structure

Each supported external chain is assigned a dedicated vault on VSC. Vaults are smart contracts that:

• Function similarly to smart wallets
• Track balances on external chains
• Operate in a fully decentralized manner with no single point of control

Dedicated per-chain vaults provide fault isolation, limiting the impact of chain-specific failures on the broader VSC system.

Bitcoin-Specific Logic

For Bitcoin, vaults track UTXOs on the Bitcoin mainnet. The vault smart contract maintains:

• A record of confirmed and validated inbound UTXOs
• The authority to determine which UTXOs are spendable

This enables secure handling of Bitcoin inputs and outputs directly from the VSC contract layer.

Asset Movement Coordination

Once inbound transactions are validated, assets are:

• Credited to the relevant VSC vault
• Managed by the vault contract
• Disbursed on outbound requests by spending UTXOs or performing an equivalent action on the external chain

This system allows for seamless and auditable movement of assets between VSC and external chains.

Security and Fallback Mechanisms

Vaults are secured by a 2/3 supermajority of validators using TSS. Validators must be bonded with collateral, which acts as a security guarantee. This fallback design minimizes user risk ensuring asset safety across volatile conditions.

Emergency Conditions

If collateral becomes insufficient or validators are compromised, a fallback mechanism is triggered. This may involve:

• Moving assets from VSC to the respective L1 chain
• Converting assets into a safer form
• Halting vault activity temporarily

This mechanism is modeled similarly to Chainflip’s emergency handling system.