As you know in order for BCH to be moved from the base layer into SmartBCH, a bridge is needed. In order for both base layer and side-chain components to “talk” to each other, a group of servers is used. These servers are called federators, and they are run by independent parties so that we can be certain that the movement of value is always secure.
If a BCH coin needs to be moved into SmartBCH, the user will send it to a specific wallet address, the coin is then locked into that address; this follows a call by federators to a contract on the SmartBCH side that will then mint a coin and send it to the destination SmartBCH wallet. A similar process occurs if a user wants to send BCH from SmartBCH back to the base layer, in this case, the coins on SmartBCH are simply destroyed, and then the coins on the base layer are unlocked and sent to the corresponding wallet.
It is important to have in mind the possibility of a chain reorganization and is for this reason that several block confirmations need to be done before coins get to their wallets. There was a recent discussion by the community on the possibility of reducing block times (while keeping total block reward unchanged) to 1 minute. Such improvement will GREATLY benefit the movement of value between the base and side-chain layers, as time will be reduced and improve the UX. It is my hope that the community would consider this option.
So those are the very basics of how value is moved between the Bitcoin Cash base layer and Smart Bitcoin Cash layer. Now let’s explore further possibilities. Just as we are able to bridge Bitcoin Cash to Smart Bitcoin Cash, we can also bridge Smart Bitcoin Cash to Ethereum, This creates a lot of new use cases for our ecosystem.
First, let’s review how a bridge between Smart Bitcoin Cash and Ethereum would work. Just as with the Bitcoin to Smart Bitcoin cash system, the bridge to Ethereum makes use of Federator servers. These federator servers watch over certain contracts on Ethereum, once a coin, token, NFT come into the bridge contract, the federators are in charge of validating the transfer by then voting on the SmartBCH side on the minting of the same coins, tokens or NFTs. The process is very safe, as the people that run the federators validating the transfer are all independent parties. In other words, any action that the contracts make need to be signed by multiple independent members. An example would be Bitcoin.com , SmartBCH dev team and our team having to sign for every single contract interaction. Not a single party can take action without the other signatures. The contracts are audited so that this is always enforced. No token can be created or moved without multiple independent signantures.
But why do we want a bridge with Ethereum? I personally believe that all Blockchains with a future would end up interconnecting to each other. Think about it like the early days of university servers being interconnected to form the internet. Just as this allowed to create the worldwide web, the connection of blockchains would allow for value and digital property to freely flow across the most efficient blockchains. A true internet of value.
Once the bridge to Ethereum is ready, we would then be able to move ETH into SmartBCH, then a decentralized exchange would have BCH/ETH pairs, all completely decentralized, with very small fees and completely secure! Any token or NFT on Ethereum becomes available, DAI could be moved, so a pair like BCH/DAI becomes available. Just as we can move tokens from Ethereum to SmartBCH, we can also move SmartBCH tokens/coins and NFTs. So we can easily move BCH into Ethereum, and then make the best of Ethereums DEFI tools and network effect! Another example would be FlexUSD being sent into Ethereum to then create a trading pair on Uniswap ver3 wBCH/FlexUSD! Want to move your NFT to a game based on the SmartBCH platform, it can be done in seconds! As SmartBCH and Ethereum blocks times are short, transfers will take just a couple of seconds. Where we going there are no exchanges, is all decentralized, services, DAOS, identities, NFTs. All running on multiple independent blockchains, that are also interconnected.