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= Coinweb PACTs (Penalty Adjudication for Cross-chain Transactions) =

Overview
Coinweb PACTs, an acronym for Penalty Adjudication for Cross-chain Transactions, represent a novel framework for executing high-security, low-cost transactions across different blockchain networks. Developed by Coinweb, these smart contracts aim to redefine how cross-chain interactions are conducted, prioritizing both security and capital efficiency.

Concept
Traditionally, cross-chain functionality has been managed through staked validator nodes and various off-chain infrastructures. However, Coinweb PACTs propose a shift towards using collateralized smart contracts for these operations. This approach, while conceptually intricate, offers a range of benefits over traditional methods.

Key Features

 * Cross-Chain Transactions: PACTs facilitate transactions across any blockchain, including Bitcoin.
 * State Machine Coordination: They are optimized for short- and medium-term cross-chain state machines with a defined Value at Risk (VaR), and adaptable for longer-term applications like non-custodial staking.
 * Capital Efficiency: PACTs demonstrate high capital efficiency, especially when the VaR is predetermined.
 * Multiple Active PACTs: Numerous PACTs can operate simultaneously, each with its own isolated collateral.
 * Customized Collateral: The collateral for each PACT is tailored to its specific use-case.
 * Adjudication Consistency: PACT adjudication is consistent and immune to reorganizations or failures in blockchain networks.
 * Versatility: PACTs are also viable for single-chain applications as an alternative to certain smart contracts.
 * Combination with Other Mechanisms: For infinite state machines, PACTs can be integrated with other systems.

Functionality
Participants engage in a PACT by executing actions in accordance with its rules, leading to a definitive final state. The capital use in PACTs is highly efficient, being necessary only during the active period of the state machine. To maximize this efficiency, it's advised to set an upper limit on the state machine's value at risk.

Non-Custodial Staking of L1 Tokens
This involves staking L1 tokens without the additional costs typically associated with staking contracts. Goals include reducing fees for staking/unstaking and simplifying the process for Coinweb tokens staked on L1 blockchains. The mechanism involves a PACT with a single Chain Transaction Sentinel and various incentives to encourage sustained staking positions.

Cross-Chain Swap
A prime example of PACT usage is in cross-chain swaps. For instance, swapping 1 BTC for 1 WBTC on different networks. The PACT ensures that once a transaction on one network (e.g., Bitcoin) is completed, a corresponding action (e.g., transferring WBTC) occurs within a set time frame on another network (e.g., Ethereum). The process is streamlined, secure, and cost-effective, with calculated collateral and minimal capital costs.

Conclusion
Coinweb PACTs mark a significant advancement in the realm of blockchain technology, offering a more secure, efficient, and versatile approach to managing cross-chain transactions. By leveraging smart contract technology, PACTs streamline the process of cross-chain interactions, ensuring safety and efficiency, thus paving the way for broader adoption and innovative applications in the blockchain ecosystem.