Contract Layer

At the contract layer, three interlocking agreements bridge the Bitcoin and Ethereum ecosystems to enable lending:

• Bitcoin Collateral Script (Taproot, hash‑lock with adaptor fallback): Collateral is locked in a Taproot script with repayment, fallback, and default paths. This ensures borrower control, prevents mid‑term seizure, and guarantees settlement at maturity.

• Loan Escrow Contract (on Ethereum): Stablecoin principal is held in an immutable escrow that mirrors the commitments of the Bitcoin script. Funds are released only after proof of collateral lock and repayment, aligning collateral release with repayment fairness.

• Off‑Chain Hedge Agreement (Options): Each loan triggers an external BTC put option purchase. This absorbs price risk for the lender and removes the need for on‑chain liquidations.