Bitcoin-Backed Treasury System

Overview

PRVNZ Treasury implements a Bitcoin-native reserve system that backs utility tokens 1:1 with BTC held in verifiable multisig vaults. This enables high-throughput digital rights management while maintaining 100% Bitcoin backing and transparent proof-of-reserves.

Core Principle: Use Bitcoin as the reserve asset while enabling use cases that Bitcoin alone cannot efficiently support.

Why Bitcoin-Backed?

Alignment with Bitcoin Principles

100% Reserve Backing:

Every PRVNZ token = 1 satoshi in verifiable multisig vaults
No fractional reserves
Real-time verification
Transparent on-chain proof

Bitcoin-Native Security:

Uses Bitcoin's P2WSH multisig (no wrapped tokens)
No synthetic assets or bridges
Direct Bitcoin custody
Timelock recovery fallback

Increases Bitcoin Utility:

Creates demand from creative economy
Locks Bitcoin productively
Demonstrates institutional custody
Strengthens Bitcoin's role as reserve asset

Architecture

┌─────────────────────────────────────┐
│      PRVNZ Blockchain               │
│   (High-Throughput Layer)           │
│   - Digital rights licensing        │
│   - Royalty calculations            │
│   - Token operations                │
└──────────────┬──────────────────────┘
               │
               │ Proof-of-Reserves
               │ Attestations
               │
┌──────────────▼──────────────────────┐
│      Bitcoin Network                │
│   (Reserve Layer)                   │
│   - Multisig treasury vaults        │
│   - 100% BTC backing                │
│   - Transparent verification        │
└─────────────────────────────────────┘

Bitcoin Multisig Custody

P2WSH Multisig Design

Configuration:

Threshold: 2-of-3 or 3-of-5 (configurable)
Native Bitcoin Script (P2WSH)
SegWit for lower fees
Batch processing optimization

Example 2-of-3 Multisig:

# Pseudocode - actual implementation in Rust
from bitcoin import *

def create_treasury_multisig():
    # Validator public keys (from TEEs)
    pubkey_1 = validator_1.get_public_key()
    pubkey_2 = validator_2.get_public_key()
    pubkey_3 = validator_3.get_public_key()
    
    # Create multisig script
    redeem_script = Script([
        OP_2,  # Threshold
        pubkey_1,
        pubkey_2,
        pubkey_3,
        OP_3,  # Total keys
        OP_CHECKMULTISIG
    ])
    
    # Generate P2WSH address
    script_hash = sha256(redeem_script)
    address = bech32_encode(script_hash, witness_version=0)
    
    return address, redeem_script

Timelock Recovery

Purpose: Emergency access if validator keys are lost

Mechanism: OP_CHECKLOCKTIMEVERIFY (BIP 65)

def create_timelock_recovery():
    # Normal spending: 2-of-3 multisig
    normal_script = create_2_of_3_multisig()
    
    # Recovery: 1-of-1 after 6 months
    recovery_script = Script([
        OP_IF,
            # Normal path (2-of-3)
            OP_2,
            pubkey_1, pubkey_2, pubkey_3,
            OP_3,
            OP_CHECKMULTISIG,
        OP_ELSE,
            # Recovery path (after 6 months)
            <6_months_in_blocks>,  # ~26,000 blocks
            OP_CHECKLOCKTIMEVERIFY,
            OP_DROP,
            recovery_pubkey,
            OP_CHECKSIG,
        OP_ENDIF
    ])
    
    return recovery_script

Token Operations

Deposit Flow (Minting)

User Action:
1. User sends BTC to treasury multisig address
2. Transaction broadcast to Bitcoin network
3. Wait for 6 confirmations (~1 hour)

Validator Actions:
4. Validators detect deposit
5. Verify transaction validity
6. Reach consensus on deposit amount
7. Mint equivalent PRVNZ tokens
8. Update proof-of-reserves

Result:
User receives PRVNZ tokens (1:1 with deposited sats)
Reserve ratio maintained at 1.0

Redemption Flow (Burning)

User Action:
1. User burns PRVNZ tokens on PRVNZ blockchain
2. Provide Bitcoin address for redemption

Validator Actions:
3. Validators verify burn transaction
4. Create Bitcoin redemption transaction
5. Collect threshold signatures (TEE)
6. Broadcast Bitcoin transaction
7. Update proof-of-reserves

Result:
User receives BTC at specified address
Tokens permanently destroyed
Reserve ratio maintained at 1.0

Proof-of-Reserves

Real-Time Verification

Components:

Asset Verification: Confirm BTC holdings on-chain
Liability Tracking: Track PRVNZ token supply
Reserve Ratio Calculation: Assets / Liabilities
Public API: Anyone can verify

Reserve Ratio Formula:

Reserve Ratio = Total BTC in Treasury / Total PRVNZ Supply

Target: 1.0 (100% backing)
Minimum: 1.0 (never go below)
Ideal: >1.0 (excess reserves = buffer)

Public Verification

Anyone can verify reserves:

# Using PRVNZ CLI
./prvnz-cli verify-reserves

# Output:
Bitcoin Reserves:     1,000.00000000 BTC
PRVNZ Supply:         1,000.00000000 PRVNZ
Reserve Ratio:        1.00
Status:               ✓ OK

Treasury Address:     bc1q...treasury...
Bitcoin Block Height: 850,000
Last Verified:        2025-10-30 12:34:56 UTC

# Verify independently using Bitcoin Core
bitcoin-cli listunspent 6 9999999 '["bc1q...treasury..."]'

Monitoring & Alerts

Continuous Monitoring

class TreasuryMonitor:
    async def monitor_reserves(self):
        while True:
            # Check reserve ratio
            ratio = await self.calculate_reserve_ratio()
            
            if ratio < 1.0:
                # CRITICAL: Reserve deficit
                await self.alert_critical(
                    "Reserve ratio below 1.0!",
                    ratio=ratio
                )
                await self.halt_minting()
            
            elif ratio < 1.05:
                # WARNING: Low buffer
                await self.alert_warning(
                    "Reserve ratio low",
                    ratio=ratio
                )
            
            # Check for stuck transactions
            pending = await self.check_pending_redemptions()
            if pending and pending.age > 1_hour:
                await self.alert_info(
                    "Redemption delayed",
                    tx=pending
                )
            
            # Verify validator attestations
            for validator in self.validators:
                attestation = await validator.get_attestation()
                if not self.verify_attestation(attestation):
                    await self.alert_critical(
                        f"Validator {validator.id} attestation invalid"
                    )
            
            # Sleep 1 minute
            await asyncio.sleep(60)

Security Considerations

Threat Model

Protected Against:

Single validator compromise (threshold multisig)
Key extraction attacks (MPC + TEE)
Fractional reserves (automated monitoring)
Unauthorized spending (consensus required)
Network attacks (Bitcoin's security)

Residual Risks:

Coordinated attack on 3+ validators (mitigated by geographic distribution)
Bitcoin network reorganization (wait for deep confirmations)
Smart contract bugs (formal verification + audits)
Oracle failures (multiple data sources)

Comparison to Alternatives

vs. Wrapped BTC (wBTC, renBTC, etc.)

Aspect	Wrapped BTC	PRVNZ Treasury
Custody	Single custodian	Distributed validators
Backing	Opaque	Transparent real-time
Security	Trust custodian	Multisig + TEE + PoA
Verification	Attestations only	Cryptographic proof
Purpose	Bring BTC to DeFi	Bitcoin-backed utility