> For the complete documentation index, see [llms.txt](https://ibvm.gitbook.io/ibvm-doc/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://ibvm.gitbook.io/ibvm-doc/how-it-works.md). # How it works IBVM is redefining how Bitcoin interacts with decentralized finance—removing custodial risks and enabling seamless, secure scalability. Here’s a breakdown of the process that powers the IBVM Chain: *** #### 🔐 1. Lock BTC on Bitcoin Layer 1 Users begin by **locking their Bitcoin** into an **IBVM-governed smart contract**, leveraging trust-minimized protocols such as BitVM to ensure the process remains decentralized and verifiable without altering Bitcoin’s base-layer rules. > 🛡️ **No central custodians, no single point of failure.** *** #### 🪙 2. Mint BTC-Backed Tokens on IBVM Chain Once BTC is securely locked, the protocol **mints equivalent BTC-backed tokens** on the IBVM Layer 2. These tokens are: * Pegged 1:1 with BTC * Fully auditable and traceable * Usable across the IBVM ecosystem for DeFi, lending, swaps, and more > 💡 These tokens unlock **smart contract functionality** for Bitcoin—something never natively possible on Layer 1. *** #### 🔁 3. Redeem BTC – Trustlessly and Instantly Users can redeem their BTC at any time by **burning the BTC-backed IBVM tokens** on the Layer 2. This triggers the unlocking of their original BTC from the smart contract. * ✅ **No intermediaries** * ✅ **Fully verifiable using zero-knowledge proofs** * ✅ **Instant settlement via rollup technology** *** #### 🚫 Eliminates Centralized BTC Bridges Traditional BTC bridges rely on custodians—creating vulnerabilities that have resulted in **billions in losses** across the crypto space. IBVM **eliminates that risk** through: * On-chain transparency * BitVM-based verifiability * Decentralized security assumptions > 🔐 **No wrapped tokens, no multisig bridges, no centralized vaults.** *** #### 🔗 Bitcoin-Native DeFi: Unlocking New Potential IBVM transforms BTC into a **programmable financial asset** by enabling: * 🔄 **Cross-chain swaps** * 🤝 **Decentralized escrow** * 💸 **Lending and borrowing** * 📈 **Yield strategies and liquidity mining** All while maintaining the unmatched **security of Bitcoin** and the **scalability of ZK-Rollups**.