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Decentralized Custody Tokens: Technical Architecture

The DCT framework handles the complete lifecycle: deposit detection, verification, minting, and redemption.

Deposit & Verification Flow​

Dedicated outpost services monitor external blockchains for deposits to dMPC-controlled addresses. When a deposit achieves sufficient confirmations (typically 6 for Bitcoin), the outpost generates a Merkle proof demonstrating the transaction's inclusion in the block and submits it to zrChain.

zrChain then performs multi-step verification:

  1. Block Header Validation: The referenced block header is fetched from consensus-verified storage (see zrChain's enshrined oracle above)
  2. Merkle Proof Verification: The transaction's inclusion is cryptographically verified against the stored block header
  3. Deduplication: A SHA256 hash of the transaction output prevents double-processing

Upon successful verification, a PendingMintTransaction is created.

Minting Flow​

Once a deposit is verified, the minting process proceeds through multiple phases:

Phase 1 - Consensus Verification: The PreBlocker confirms validators have reached consensus on Solana nonce values and account states.

Phase 2 - Transaction Construction: The system prepares a Solana transaction specifying the exact mint amount and recipient.

Phase 3 - MPC Signing: The transaction is submitted to the treasury module, which collects threshold signatures from distributed key holders.

Phase 4 - Broadcast & Confirmation: The signed transaction is broadcast to Solana. The sidecar oracle monitors for mint events and reports confirmation back to zrChain.

Redemption Flow​

When users burn wrapped tokens on Solana to redeem the underlying asset:

  1. Burn Detection: The sidecar oracle monitors Solana for burn events
  2. Maturity Period: Burns enter an escrow period before being processed
  3. Transaction Construction: The relevant outpost constructs an unsigned transaction
  4. MPC Signing: The transaction is signed through the distributed MPC infrastructure
  5. Broadcast: The outpost broadcasts the signed transaction to the external blockchain

Supply Accounting​

The DCT system maintains strict supply invariants:

  • Custodied: Native assets held in custody addresses on external chains
  • Pending: Deposits verified but not yet minted on Solana
  • Minted: Wrapped tokens in circulation on Solana

The invariant Custodied = Pending + Minted is enforced at every state transition. This ensures wrapped token supply is always fully backed by custodied reserves.