Ducat Protocol is a Bitcoin L1-native credit protocol that lets holders borrow UNIT or USDC against their BTC at 0% APR without giving up custody. Users deposit BTC into a 2-of-2 Taproot vault, set a collateral ratio, and receive dollar liquidity while keeping their keys.
What is Ducat Protocol?
Ducat Protocol is a non-custodial credit protocol built directly on Bitcoin L1. It takes BTC deposits as input, locks them in 2-of-2 Taproot vaults enforced by Bitcoin Script, and outputs loans in UNIT (a dollar-pegged stablecoin issued on Bitcoin L1) or USDC. All vault, loan, and liquidation logic settles as Bitcoin transactions, with no bridges, sidechains, or wrapped tokens.
Key Features
- Non-custodial 2-of-2 Taproot vaults — BTC is locked so no single party can move funds; users redeem Bitcoin any time by repaying the loan.
- Zero-interest borrowing — a one-time 7% minting service charge applies when UNIT is minted, with no ongoing APR.
- Borrow up to 62.5% of vault BTC value — collateral ratios are selectable from conservative to aggressive, with a 135% liquidation threshold.
- UNIT or USDC output — receive UNIT on Bitcoin L1 or USDC via automatic Circle conversion for instant dollar liquidity.
- Single-block BTC redemption — repay and redeem BTC within one Bitcoin block.
- Real-time health monitoring — dashboard tracks collateral ratio, liquidation price, and dynamic health indicator.
- Bitcoin Script enforcement — vault creation, loan terms, and liquidation rules are enforced on-chain and independently verifiable by validators.
- Ecash transfer layer — UNIT transfers instantly and without fees, with 1:1 USDC swaps available.
Who is it for?
- Long-term BTC holders seeking dollar liquidity without triggering a taxable sale or closing their Bitcoin position.
- Bitcoin-native borrowers who want USDC or UNIT without using bridges, L2s, or custodial lenders.
- Liquidation participants who recapitalise undercollateralised vaults (below 135%) to buy discounted BTC at roughly 8-9% ROIC.
- Protocol validators who run nodes to independently verify vault and loan state on Bitcoin.
What can you do with Ducat Protocol?
- Borrow against BTC: Deposit BTC into a Taproot vault, choose a collateral ratio, and mint UNIT or receive USDC while retaining full BTC exposure.
- Manage a vault: Track collateral ratio, monitor liquidation price, and adjust position from a single dashboard with real-time BTC price updates.
- Earn via liquidations: Buy discounted BTC by recapitalising vaults that fall below the 135% collateral threshold.
- Transfer dollar value on Bitcoin: Hold and transfer UNIT via the built-in ecash layer or swap 1:1 to USDC.
How does Ducat Protocol work?
Deposit BTC into a 2-of-2 Taproot vault, then set a collateral ratio and borrow up to 62.5% of the vault's BTC value. The Ducat SDK builds BTC transactions locally according to the protocol spec, and every vault, loan, and liquidation settles on Bitcoin L1. Repay any time to redeem BTC in a single block.
Pricing
Ducat Protocol charges a one-time 7% minting service charge when UNIT is minted. There is no ongoing interest (0% APR).
