# Stellar-Bitcoin Bridge Project Architecture

1. Overview

The Stellar-Bitcoin Bridge is a cross-chain solution enabling secure asset transfers between the Bitcoin and Stellar networks. This document outlines the high-level architecture of the project, detailing its main components and their interactions.

2. System Components

2.1 Smart Contract Layer (Soroban)

The core of the bridge functionality is implemented in Soroban smart contracts on the Stellar network.

Key Components:

• Header Storage Contract: Stores and validates Bitcoin block headers.
• Transaction Verification Contract: Verifies Bitcoin transactions using Merkle proofs.
• Token Minting/Burning Contract: Manages the minting and burning of tokenized Bitcoin on Stellar.
• Atomic Swap Contract: Handles cross-chain atomic swaps for enhanced security.

2.2 Relayer System

An off-chain component that bridges the Bitcoin and Stellar networks.

Key Components:

• Bitcoin Full Node: Monitors the Bitcoin blockchain for relevant transactions.
• Block Header Submitter: Submits Bitcoin block headers to the Soroban smart contract.
• Transaction Monitor: Tracks and reports on the status of cross-chain transactions.
• Scalability Manager: Implements load balancing and sharding for high transaction volumes.

2.3 User Interface

Provides a user-friendly interface for interacting with the bridge.

Key Components:

• Web Application: Responsive web interface for desktop and mobile users.
• Mobile App (future expansion): Native mobile applications for iOS and Android.

2.4 Backend API

Serves as an intermediary between the user interface and the blockchain components.

Key Components:

• RESTful API: Handles user requests, authentication, and data formatting.
• WebSocket Server: Provides real-time updates on transaction status.

2.5 Security Module

Ensures the overall security of the bridge system.

Key Components:

• Multi-signature Manager: Manages multi-sig requirements for contract upgrades and emergency stops.
• Rate Limiter: Prevents spam and DoS attacks.
• Fraud Detection System: Monitors for suspicious activities and potential exploits.

2.6 Compliance Module

Handles regulatory compliance aspects of the bridge.

Key Components:

• KYC/AML Service: Manages Know Your Customer and Anti-Money Laundering processes.
• Regulatory Reporting Tool: Generates necessary reports for regulatory bodies.

3. Data Flow

1. User initiates a transfer through the User Interface.
2. Backend API validates the request and initiates the transfer process.
3. For BTC to XLM transfers:
   1. Relayer System monitors for the Bitcoin transaction.
   2. Once confirmed, it submits the transaction proof to the Smart Contract Layer.
   3. Smart Contract Layer verifies the transaction and mints equivalent tokens on Stellar.
4. For XLM to BTC transfers:
   1. Smart Contract Layer locks the XLM tokens.
   2. Relayer System initiates the Bitcoin transaction.
   3. Once confirmed, Smart Contract Layer burns the locked XLM tokens.
5. Security Module monitors all processes for potential issues.
6. Compliance Module ensures all transfers adhere to regulatory requirements.
7. User Interface updates with real-time status via WebSocket connection.

4. Scalability and Performance

• Relayer System uses sharding to distribute load across multiple nodes.
• Smart Contract Layer is optimized for efficient execution on Soroban.
• Caching layers are implemented in the Backend API to reduce blockchain queries.
• Load balancers are used for the User Interface and Backend API to handle high traffic.

5. Security Measures

• Multi-signature schemes for all critical operations.
• Regular security audits of smart contracts and off-chain components.
• Encrypted communication channels between all system components.
• Hardware Security Modules (HSMs) for key management.
• Comprehensive logging and monitoring for quick anomaly detection.

6. Disaster Recovery and Business Continuity

• Regular backups of all system states and data.
• Redundant nodes for the Relayer System and Backend API.
• Clear protocols for handling blockchain forks or network outages.
• Insurance fund to cover potential losses from unforeseen circumstances.

7. Future Expansions

• Integration with additional blockchain networks.
• Implementation of a decentralized governance system for parameter adjustments.
• Development of a SDK for third-party integrations.

8. Conclusion

This architecture provides a robust, secure, and scalable foundation for the Stellar-Bitcoin Bridge. It’s designed with modularity in mind, allowing for easy updates and expansions as the project evolves.