DA-01 · LESSON 01

What Ducat is designed to do

KEY DEFINITIONS

Terms used in this lesson

Collateral: An asset pledged against a debt; it can be used to cover the debt if agreed conditions are breached.
UNIT: Ducat’s dollar-pegged stablecoin, the asset a borrower can create against bitcoin collateral.
Stablecoin: A digital asset designed to track a reference value, usually the United States dollar.
Vault: A set of Bitcoin outputs and spending rules that holds collateral and represents the current loan state.
Guardian: A Ducat policy-checking signer that can authorize or reject defined protocol transactions.
Oracle: A system that reports outside information, such as a market price, for use by a protocol.
Validator: Software or a participant that independently checks state transitions under a system's rules. The exact role depends on the protocol being discussed.
BTC: The common market ticker for bitcoin.
USD: United States dollar, the reference currency in a BTC/USD price.
Preimage: The original secret data whose hash equals a previously committed value.
Hashlock: A spending condition that requires revealing data matching a committed hash.
Witness: Signatures, scripts, or other data supplied to satisfy a Bitcoin output’s spending condition.

Ducat lets people borrow against bitcoin without first moving that collateral to another blockchain. UNIT is Ducat’s dollar-pegged stablecoin: one output of a wider system of vaults, risk checks, signatures, price data, and Bitcoin transactions.

35 min Difficulty 3/5 Not started

VISUAL MODEL

See the whole mechanism before going step by step

Use the diagrams to orient yourself. Then the guided explanation below teaches every part in depth.

4 explanatory views

CONCEPT-SPECIFIC MAP · ducat vaultA Ducat action moves one Bitcoin-anchored vault state to a successorSelect any state to inspect its exact role.

RELATIONSHIP MAPInputs, rule, and outputs

01
PREDECESSORCurrent vault outpoint
The current Bitcoin output anchors collateral and identifies the state being spent.
02
REQUESTWhat Ducat is designed to do
The What Ducat is designed to do workflow proposes one exact action and successor state.
03
POLICYProfile, oracle, signatures
Applicable policy, price evidence, authorization, and transaction shape are checked.
04
BITCOIN SPENDScript-valid transaction
Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules.
05
SUCCESSORNew outpoint and state
Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

Rule shown: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state.

STAGE 1 OF 5PREDECESSOR: Current vault outpoint

The current Bitcoin output anchors collateral and identifies the state being spent.

Governing relationship: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state. Complete path: 1. PREDECESSOR, Current vault outpoint. The current Bitcoin output anchors collateral and identifies the state being spent. 2. REQUEST, What Ducat is designed to do. The What Ducat is designed to do workflow proposes one exact action and successor state. 3. POLICY, Profile, oracle, signatures. Applicable policy, price evidence, authorization, and transaction shape are checked. 4. BITCOIN SPEND, Script-valid transaction. Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules. 5. SUCCESSOR, New outpoint and state. Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

1. State transitionWhat exists, what changes, and what results

BEFORE

Assume a borrower locks 60,000,000 sats, borrows 18,000 UNIT, and provides a separate 30,000-sat fee input for this illustrative example. These amounts differ from the requir…

MECHANISM

The borrower wants access to dollar-denominated value without selling the bitcoin. Borrowing creates both an asset they can use and a debt they must eventually repay.

AFTER

UNIT is the borrowed asset, not the entire protocol. Ducat is the complete loop that connects collateral, debt, authorization, price information, and settlement.

Text equivalent: Starting from Assume a borrower locks 60,000,000 sats, borrows 18,000 UNIT, and provides a separate 30,000-sat fee input for this illustrative example. These amounts differ from the required practice cases and are not current protoco… The mechanism begins when The borrower wants access to dollar-denominated value without selling the bitcoin. Borrowing creates both an asset they can use and a debt they must eventually repay. The resulting lesson is UNIT is the borrowed asset, not the entire protocol. Ducat is the complete loop that connects collateral, debt, authorization, price information, and settlement.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 4

Begin with the borrower

The borrower wants access to dollar-denominated value without selling the bitcoin. Borrowing creates both an asset they can use and a debt they must eventually repay.

Complete path: 1. Begin with the borrower: The borrower wants access to dollar-denominated value without selling the bitcoin. Borrowing creates both an asset they can use and a debt they must eventually repay. 2. Build the two linked transactions: An issuance account is a Bitcoin output that represents how much UNIT issuance capacity remains under one protocol profile. In the captured open flow, an issue parent spends the current issuance-account output, allocates UNIT, and creates a successor account with the remaining capacity. A dependent child spends the required parent output plus borrower funding, then creates the vault output that represents collateral and debt. 3. Confirm the new state: The borrower signs wallet inputs and the Guardian authorizes its assigned protocol inputs only after checking the pair. Bitcoin confirmation spends the old inputs and creates the successor issuance account, borrower UNIT output, and new vault output that validators reconstruct. 4. Close safely or liquidate: A healthy borrower can repay the UNIT debt and spend the vault through its repayment path to recover permitted collateral. If a checked BTC/USD price crosses the threshold already committed in the vault, the oracle releases the matching preimage. A liquidator constructs an eligible full repo or partial trim successor, Guardians validate and sign the exact transaction where required, Bitcoin checks the revealed hashlock and signatures, and validators accept the confirmed successor state.

3. Rule and failure boundaryWhat accepts the result and where it can stop

ACCEPTED PATH

The issue parent must consume live issuance capacity, create the exact allocation and successor account, and confirm before its child. The child must conserve satoshis, bind the matching debt, and satisfy every wallet, Guardian, Bitcoin, and Ducat check.

CHANGED CONDITION

A spent account, missing parent output, mismatched issuance and debt, bad witness, or ineligible liquidation stops at its named boundary and leaves the last confirmed state authoritative.

Important distinction: Borrowing UNIT is the same as selling bitcoin for dollars. A sale permanently exchanges the bitcoin. A Ducat loan locks bitcoin as collateral, creates a debt, and lets the borrower recover the collateral by repaying. The borrower also carries liquidation risk while the debt remains open.

Text equivalent: The accepted path is enforced by The issue parent must consume live issuance capacity, create the exact allocation and successor account, and confirm before its child. The child must conserve satoshis, bind the matching debt, and satisfy every wallet, Guardian, Bitcoin, and Ducat check. If the required condition changes, A spent account, missing parent output, mismatched issuance and debt, bad witness, or ineligible liquidation stops at its named boundary and leaves the last confirmed state authoritative.

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Learn the idea

Ducat is easiest to understand as a loan lifecycle. UNIT is Ducat's intended dollar-pegged asset, while a vault is a Bitcoin output that represents one loan's collateral and UNIT debt. A Guardian is a policy-checking signer, and an oracle supplies authenticated outside price material. A borrower locks bitcoin, creates dollar-denominated debt, and later either repays to recover the collateral or enters liquidation if the collateral value falls too low. Each stage is represented by Bitcoin transactions plus checks performed by Ducat software and signers.

GUIDED EXPLANATION1/4 ideas inspected

Begin with the borrower

The borrower wants access to dollar-denominated value without selling the bitcoin. Borrowing creates both an asset they can use and a debt they must eventually repay.

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“Borrowing UNIT is the same as selling bitcoin for dollars.”

A sale permanently exchanges the bitcoin. A Ducat loan locks bitcoin as collateral, creates a debt, and lets the borrower recover the collateral by repaying. The borrower also carries liquidation risk while the debt remains open.

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