Crypto 101 · Research papers
zBTC Case Study: Bitcoin on Proof-of-Stake Rails
Abstract
zBTC is a token on Solana intended to be redeemable one-for-one for bitcoin. In our view it is the first clear example of a decentralized bridge for bitcoin on Solana, and the pattern this series describes: a scarce proof-of-work asset gains programmability on proof-of-stake rails while its issuance remains governed by Bitcoin's own rules. We describe the pattern at a level supported by public documentation, position zBTC against earlier custodial designs, and list the trust assumptions a user should understand.
Keywords: zBTC, Zeus Network, Bitcoin on Solana, wrapped Bitcoin, guardian network
1. Why this example
Bitcoin's issuance is among the most rigid in the industry: a subsidy halved every 210,000 blocks, converging on a total just under 21 million [1, 2]. That rigidity is valuable and also limiting, because Bitcoin's base layer is not designed for lending markets or automated market makers. Solana is designed for cheap, fast, composable execution [3]. zBTC, from Zeus Network, is an attempt to combine the two.
2. Where zBTC sits in the history
Representing bitcoin on another chain is an older idea. WBTC on Ethereum, documented by BitGo, Kyber Network and Ren in 2019, established the widely used custodial model, in which one company holds the bitcoin [4]. In our view, zBTC is the first clear example of a decentralized bridge for bitcoin on Solana: Zeus Network describes it as permissionless and controlled jointly by a set of guardians rather than a single custodian [5]. That is our position and the starting point of the design pattern this series describes; it is a judgement about how to classify the designs, not a settled fact, and other decentralized bitcoin bridges exist on other networks. It makes the thesis of this series concrete: asset layer on proof of work, rails on proof of stake.
3. How the pattern works
According to Zeus Network's documentation, a user deposits bitcoin to an address associated with their Solana account, a set of guardians validates the deposit, and an equivalent amount of zBTC is issued on Solana; redemption reverses the process [5]. The documentation also describes a proof-of-reserves view of the bitcoin backing the token. Read the current documentation for the exact custody, guardian and fee design before relying on any statement here.
4. Through the lens of supply and demand
- Supply. Bitcoin's supply is unchanged. zBTC's supply should equal the bitcoin held against it, which is the conservation principle.
- Demand. Demand for zBTC comes from holders who want bitcoin exposure inside Solana applications: trading pairs, collateral for lending, and liquidity provision [6].
- Credibility. The token is only as credible as its reserve and the parties who control it.
- Liquidity. Liquidity on Solana venues determines how easily zBTC trades near its redemption value.
5. Trust assumptions
Table 1. Questions to ask of any wrapped-bitcoin token.
| Question | Custodial model (WBTC) | Guardian model (zBTC per its documentation) |
|---|---|---|
| Who holds the bitcoin? | A custodian | A set of guardians controlling keys jointly |
| How is a deposit verified? | Custodian records | Guardian attestations |
| How can you check backing? | Attestations and reserve addresses | Proof-of-reserves view |
| Main risk | Custodian failure or censorship | Threshold of guardians compromised or colluding |
6. Conclusion
zBTC illustrates why the layered view is useful. Bitcoin remains the scarce settlement asset, Solana becomes the venue where it can earn fees or serve as collateral, and the bridge between them is the part whose trust model deserves the most scrutiny. The same reasoning applies to smaller proof-of-work assets, as the next paper shows for Luckycoin.
References
- Bitcoin Core developers (2009). GetBlockSubsidy (src/validation.cpp). Bitcoin Core source code: the consensus rule for the block subsidy (50 coins, halved every nSubsidyHalvingInterval blocks). https://github.com/bitcoin/bitcoin/blob/master/src/validation.cpp
- Bitcoin Wiki contributors (2010). Controlled supply. Bitcoin Wiki: derivation of the 21 million cap from the halving schedule. https://en.bitcoin.it/wiki/Controlled_supply
- Yakovenko, A. (2017). Solana: A new architecture for a high performance blockchain. Whitepaper introducing Proof of History. https://solana.com/solana-whitepaper.pdf
- BitGo, Kyber Network, & Ren (2019). Wrapped Tokens: A multi-institutional framework for tokenizing any asset. Whitepaper describing Wrapped Bitcoin (WBTC) on Ethereum. https://wbtc.network/assets/wrapped-tokens-whitepaper.pdf
- Zeus Network (2024). Zeus Network documentation. Official documentation for zBTC, the Guardian network and proof of reserves. https://docs.zeusnetwork.xyz/
- Adams, H., Zinsmeister, N., Salem, M., Keefer, R., & Robinson, D. (2020). Uniswap v2 Core. Whitepaper: constant-product automated market maker with fees paid to liquidity providers. https://uniswap.org/whitepaper-v2.pdf
Common questions
Was zBTC the first wrapped bitcoin?
No. Wrapped Bitcoin on Ethereum (WBTC) was documented in 2019 and is custodial. In our view zBTC is the first clear example of a decentralized, guardian-based bridge for bitcoin on Solana, which is why we use it as our reference design.
Does zBTC change Bitcoin's supply?
It should not. A properly backed zBTC is issued against bitcoin held in reserve, so the total number of bitcoin remains capped at the protocol's schedule.
General education, not financial, tax or legal advice. Figures are schematic. Protocol parameters are cited to primary sources and can change; verify against the linked source before relying on them.