Galaxy's analysis reveals that the sustainability of BitVM-based two way pegs hinges on liquidity management, operational transparency, and robust challenge mechanisms during withdrawal processes.
BitVM's two way peg relies on trusted operators controlling user funds in a multi-signature setup, underscoring the need for users to trust the operator's integrity and liquidity.
The intricate process of pegouts involves burning funds on the second layer and creating Partially Signed Bitcoin Transactions, requiring users to navigate fees and operator negotiations.
Galaxy highlights the critical 14-day challenge window as a safeguard against withdrawal fraud; if operators fail to prove correct transaction execution, they face severe financial consequences.
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