Native BTC ⇄ M1: paired HTLC components

Every market on BATHRON is a pair against M1, and the pair that matters first is Bitcoin itself: without a way for native BTC to enter and leave M1, no other market can be priced in BTC terms. The burn route creates M1 once and irreversibly (see From destroyed BTC to M1); the paired HTLC construction is how BTC and M1 change hands afterwards — reversibly, repeatedly, and without anyone holding either side.

The mechanism: two locks, one secret

BATHRON can verify Bitcoin facts, but it cannot move native BTC or trigger a Bitcoin transaction. So the BTC leg is an ordinary Bitcoin transaction, and the two legs are tied together by a shared secret rather than by a custodian.

  Bitcoin                                   BATHRON
  ────────                                  ────────
  P2WSH HTLC: pay to hash H, or             M1 HTLC: pay to hash H, or
  refund after CLTV timeout T_btc           refund after timeout T_m1
        │                                          │
        └───────────── same hash H ────────────────┘
                              │
        claiming one leg reveals the preimage of H —
        the other leg becomes claimable with it
                              │
              both settle, or both refund on timeout

1. The two parties agree on a price off-chain (a quote from a Liquidity Provider, or a direct negotiation — the protocol does not care).
2. One side locks BTC in a Bitcoin P2WSH script: spendable with the preimage of H, or refundable to the sender after a CLTV timeout.
3. The other side locks M1 on BATHRON under a hashlock keyed to the same H, with a shorter timeout.
4. The party holding the secret claims the leg it wants; that claim publishes the preimage on chain, and the counterparty uses it to claim the other leg.
5. If either side walks away, both timeouts fire and each party is refunded.

The timeout on the leg locked second is shorter than the timeout on the leg locked first, so that a party who learns the preimage cannot claim one leg while the other has already refunded.

The same construction works with a proof instead of a preimage: a BATHRON covenant can release M1 when TX_CONFIRMED proves that a given Bitcoin payment is buried under the in-consensus header chain (see Bitcoin facts inside consensus).

What this gives a market

• Native BTC enters M1 and leaves M1 without a custodian, a bridge or a wrapped asset.
• Bitcoin sees two unremarkable transactions; the size and counterparties of the trade can stay shielded on the BATHRON side (see Confidential settlement).
• Any chain with hashlocks and timelocks can be paired the same way — a capability, not a shipped product (see Pairing an external asset against M1).

Known limit: the initiator's free option

Between the two locks the initiator can wait and decide whether to complete or let the trade time out, depending on how the price moved; this "free option" is priced by the counterparty (premium, collateral, short timeouts), not eliminated by the protocol.

What was demonstrated

On testnet, paired-HTLC components have been exercised end to end: an M1 HTLC on BATHRON and a Bitcoin P2WSH HTLC keyed to the same preimage, both legs claimed and the same preimage verified on each chain. A general atomic client service — every intermediate state, reorganisation rule and refund branch specified and reviewed — is not claimed; see Status & claims.

Primitives: hashlocks (HTLC) · CLTV / CSV · TX_CONFIRMED · shielded transfers

See also: Delivery-versus-payment and OTC · Create your first market