Seeking feedback: cBTC – a Bitcoin-native working capital / credit protocol

Hello everyone,

I’m looking for technical and conceptual feedback on a project I’ve been working on called cBTC.

The goal of cBTC is to explore whether Bitcoin can be used as productive capital (working capital / credit) without introducing fiat pegs, price oracles, liquidations, or custodial risk.

This is not a token sale, not a stablecoin, and not a DeFi-style lending platform.

High-level idea

cBTC is a Bitcoin-native credit protocol built around the following principles:

Everything is denominated in BTC, not fiat

No price feeds or liquidations
No rehypothecation
No custodians holding user funds
Deterministic, conservative rules

Credit is issued via Minting Channels:

A Bitcoin holder locks BTC on-chain
For each 1 BTC deposited:

70% is time-locked as principal
20% goes to a global Redemption Pool
10% is prefunded yield

A fixed amount of cBTC is minted at 30% LTV
bearer-style accounting unit
synthetic accounting unit backed by BTC
Bitcoin-denominated credit unit

This avoids unnecessary fights about UTXOs vs IOUs.

Key mechanics

Issuance

Fixed issuance rate (no dynamic leverage)
Max LTV: 30%
No refinancing or rollovers

Yield

Prefunded at channel creation
Non-linear and time-based
Full yield only after 1 year
Early exit forfeits unvested yield to the Redemption Pool

Redemption

Uses a global BTC Redemption Pool
cBTC is burned on redemption
No principal or yield is ever touched
Deterministic haircuts based on reserve coverage
No liquidations, ever

Solvency

Global rule: Redemption Pool ≥ 50% of max redemption liability
issuance is restricted / halted under defined conditions
No discretionary intervention

Current status

Whitepaper rewritten to reflect the above design
A regtest MVP is being built using Bitcoin Core
Coordinator scripts simulate:

opening Minting Channels
BTC collateral flows
cBTC accounting (off-chain for now)

The code and documentation are public here:
👉 https://github.com/jamestector-coder/cbtc-protocol/tree/main

There’s a full regtest setup guide so others can reproduce the environment.

What I’m looking for feedback on

I’d really appreciate critical feedback, especially on:

1. Economic design

Does the model make sense without liquidations?
Are the incentives coherent?
Any obvious attack vectors?

2. Redemption mechanics

Tiered haircuts vs FIFO vs pro-rata
Edge cases under stress

3. Trust model

Separation between Bitcoin-enforced custody and coordination
What assumptions feel too strong or too weak?

4. Comparison

How you’d position this vs wrapped BTC, Fedimint, Lightning-native assets, etc.

I’m not assuming this is “the right answer” — the purpose is to get informed critique early, before anything solidifies.

What this is NOT

Not a stablecoin
Not pegged to USD
Not yield farming
Not a promise of returns
Not production-ready

This is an open experiment, and I’m intentionally putting it out early to learn from people who’ve thought deeply about Bitcoin economics.

Thanks in advance for any feedback — even (especially) if it’s critical.

James Tector