DA-02 · LESSON 08

Issue and burn reconciliation

KEY DEFINITIONS

Terms used in this lesson

UNIT: Ducat’s dollar-pegged stablecoin, the asset a borrower can create against bitcoin collateral.
Vault: A set of Bitcoin outputs and spending rules that holds collateral and represents the current loan state.
Validator: Software or a participant that independently checks state transitions under a system's rules. The exact role depends on the protocol being discussed.
Runestone: Transaction data interpreted by the Runes protocol to describe token creation or allocation.

Borrow and repay flows connect UNIT issuance or burning to vault debt transitions so validators can reconcile the token change with the collateralized action.

65 min Difficulty 4/5 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
REQUESTIssue and burn reconciliation
The Issue and burn reconciliation 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, Issue and burn reconciliation. The Issue and burn reconciliation 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

A differential is the arithmetic difference between the old state and its successor. The trace uses explicit amounts so direction and equality can be checked.

MECHANISM

Borrow uses an issue transaction; repay uses a burn transaction with a runestone that directs the repayment amount to the burn destination. If a repayment input has token cha…

AFTER

Issuance must equal the debt increase. Repayment burn must equal the debt decrease. Extra UNIT supplied to repayment can return as token change rather than silently reducing…

Text equivalent: Starting from A differential is the arithmetic difference between the old state and its successor. The trace uses explicit amounts so direction and equality can be checked. The mechanism begins when Borrow uses an issue transaction; repay uses a burn transaction with a runestone that directs the repayment amount to the burn destination. If a repayment input has token change, a direct output selector with amount zer… The resulting lesson is Issuance must equal the debt increase. Repayment burn must equal the debt decrease. Extra UNIT supplied to repayment can return as token change rather than silently reducing more debt.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 4

Build the token parent

Borrow uses an issue transaction; repay uses a burn transaction with a runestone that directs the repayment amount to the burn destination. If a repayment input has token change, a direct output selector with amount zero routes all UNIT remaining after the burn edict to that named change output.

Complete path: 1. Build the token parent: Borrow uses an issue transaction; repay uses a burn transaction with a runestone that directs the repayment amount to the burn destination. If a repayment input has token change, a direct output selector with amount zero routes all UNIT remaining after the burn edict to that named change output. 2. Build the vault child: The vault transaction consumes the old vault state and creates a successor with the corresponding debt change. 3. Bind the relationship: The child depends on or references the parent structure expected by the action so the pair can be checked together. 4. Validate equal differentials: The token amount issued or burned must match the permitted vault debt increase or decrease after fees and unrelated outputs are separated.

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

ACCEPTED PATH

The worked case executes the named inputs and checks in the displayed order. The token amount issued or burned must match the permitted vault debt increase or decrease after fees and unrelated outputs are separated.

CHANGED CONDITION

A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. Repayment is an action-specific paired transition. The burn must reconcile with the identified vault successor and request.

Important distinction: Burning UNIT anywhere automatically pays down any vault owned by the burner. Repayment is an action-specific paired transition. The burn must reconcile with the identified vault successor and request.

Text equivalent: The accepted path is enforced by The worked case executes the named inputs and checks in the displayed order. The token amount issued or burned must match the permitted vault debt increase or decrease after fees and unrelated outputs are separated. If the required condition changes, A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. Repayment is an action-specific paired transition. The burn must reconcile with the identified vault successor and request.

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Learn the idea

Issuance creates spendable UNIT while increasing a vault's debt. Burning removes UNIT from circulation while reducing debt. Reconciliation means the validator proves the token change and debt differential belong to the same permitted action and agree in amount.

GUIDED EXPLANATION1/4 ideas inspected

Build the token parent

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“Burning UNIT anywhere automatically pays down any vault owned by the burner.”

Repayment is an action-specific paired transition. The burn must reconcile with the identified vault successor and request.

FINISH LEARNING FIRST

The questions unlock after every required learning activity

Inspect every guided idea, open the worked example, rebuild its mechanism, and complete the deterministic lesson tool. Your progress is saved automatically.