HedgeMint

Short tagline for HedgeMint.DoneMint stablecoins against your BTC without fear of liquidation — DLCs hedge the volatility for you, trustlessly, on Bitcoin L1.

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Inspiration

Bitcoin holds over $1T in liquidity, yet minting stablecoins against it remains a hard problem. The core issue: BTC is volatile, and collateral can lose value fast. Existing approaches (MakerDAO-style overcollateralization, centralized custodians) either lock up excessive capital or introduce trust assumptions. We asked: what if the protocol itself hedged the volatility risk — trustlessly, on Bitcoin L1? Discreet Log Contracts (DLCs) are the answer. They enable conditional payouts on Bitcoin using oracle attestations, with no bridges, no wrapping, and no custodians. If BTC drops, the DLC pays out to cover the collateral loss. The stablecoin stays pegged. The user's BTC stays on Bitcoin.

What it does

HedgeMint lets users deposit BTC and mint hmUSD — a USD-pegged stablecoin backed by hedged Bitcoin collateral. The flow:

User deposits BTC into a non-custodial vault Protocol auto-creates a DLC with liquidity providers to hedge downside risk User receives hmUSD at 95% LTV DLCs roll over on 7-day cycles to maintain continuous hedge coverage User burns hmUSD anytime to reclaim their BTC

The key innovation is dynamic hedge coverage. The protocol maintains a target hedge ratio and adjusts DLC parameters as BTC price moves.

How we built it

Frontend prototype built with React, using inline SVG for real-time chart rendering and gauge visualizations. The app has four screens: Landing, Mint, Dashboard, and Redeem — each demonstrating a stage of the user journey. Simulated price engine updates BTC/USD every 2 seconds, propagating through the entire UI: charts, collateral ratios, DLC payout calculations, and PnL metrics all respond in real-time. DLC visualization renders a mock contract state showing oracle feed, strike price, hedge payout, and a stylized OP_DLC script trace — making the trustless settlement mechanism tangible for demo purposes.

Challenges we ran into

Time constraints forced us to simulate the DLC engine rather than integrate a real DLC library. The protocol logic is sound, but a production version needs rust-dlc or DLC.Link integration for on-chain contract creation and settlement. Counterparty liquidity is the chicken-and-egg problem. Who takes the other side of the DLC? We designed around an LP pool model, but bootstrapping that liquidity is a go-to-market challenge, not a technical one. Rolling hedges introduce basis risk. Each 7-day DLC rollover has a brief unhedged window. Staggered expiries across the vault portfolio mitigate this, but add complexity. Oracle liveness — if the oracle goes down, DLCs can't settle. Fallback mechanisms (timeout clauses returning funds to depositors) are necessary but weren't implemented in the prototype.

Accomplishments that we're proud of

Designed a novel stablecoin mechanism that uses DLCs for collateral hedging rather than brute-force overcollateralization — enabling 95% LTV versus the typical 50-66% in existing BTC-backed stablecoin designs. Built a fully interactive prototype with live price simulation, real-time collateral ratio tracking, and a DLC contract visualization that makes trustless settlement intuitive to non-technical audiences. Formalized the hedge payout math showing that effective collateral value remains stable regardless of BTC price action, as long as hedge coverage holds — a cleaner model than liquidation-dependent approaches. Created an end-to-end user flow (deposit → hedge → mint → monitor → redeem) that demonstrates the full protocol lifecycle, not just a single feature. Kept the architecture Bitcoin-native: no bridges, no wrapping tokens, no sidechains. DLCs settle on L1 using oracle attestations — the trust model is minimal by design.

What we learned

DLCs are underutilized. They solve real problems — non-custodial hedging, conditional payouts, oracle-attested settlement — but tooling is still early. Libraries like rust-dlc and bitcoin-s exist but require significant integration work. Peg stability is a design problem, not just a collateral problem. Over-collateralization alone is capital-inefficient. Hedging the collateral itself is a fundamentally better approach — it lets you offer higher LTV while maintaining safety. Oracle design matters enormously. The entire system's trustlessness depends on independent, reliable oracle attestations. A compromised oracle breaks the hedge. Multi-oracle schemes (threshold signatures) are essential for production. Visualizing DeFi mechanics builds trust. Showing users the DLC contract state, oracle feeds, and hedge payout in real-time makes the "trustless" claim tangible rather than abstract.

What's next for Untitled

Integrate rust-dlc for real on-chain DLC creation and settlement Build counterparty LP pool with incentive mechanisms Multi-oracle threshold attestation for hedge reliability Lightning integration for instant mint/redeem Testnet deployment with real BTC vaults

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