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Bit

A Peer-to-Peer Electronic Cash System

Abstract. A purely peer-to-peer version of electronic cash should not only allow payments to be sent directly from one party to another, but should guarantee its own scarcity without trust in any issuer, treasurer, or committee. We propose a refinement of Bitcoin, deployed on Ethereum as an ERC-20 paired with a Uniswap v4 hook, in which the supply contracts by an immutable rule encoded directly in the exchange mechanism itself. Every transfer routed through the canonical liquidity pool submits a fixed portion of its value to an irreversible burn: a purchase pays 1%; a sale pays 5%, with the latter funding its own buy-back before destruction. The contract has no mint function and no privileged owner. The resulting supply sequence is monotone non-increasing in time and converges, in the limit, only downward.

1. Introduction

Commerce on the Internet has come to rely on tokens whose scarcity is promised but rarely enforced. So-called deflationary assets typically depend on a multisig, a treasury, or an off-chain bot to perform their burns at the operator's discretion. This reintroduces precisely the trust assumption Bitcoin was designed to eliminate: those who may destroy may also abstain. What is needed is a token whose contraction is mechanical, automatic, and indifferent to the will of any operator.

We propose Bit, a token in which the act of trading is the act of burning. The protocol consists of a single fixed-supply ERC-20 paired against ETH in a canonical Uniswap v4 pool. A small hook contract, bound to the pool at deployment, intercepts every swap and applies the burn rule before settlement. No external action is required; no operator may opt out. As long as the pool is used, the supply falls.

2. Transactions

We define a Bit transaction as a swap dispatched through the Uniswap v4 PoolManager against the (ETH, Bit) pool. The pool key is bound at deployment to a hook address whose low bits satisfy the BEFORE_SWAP and AFTER_SWAP flags. At each call, the hook is invoked with the direction and signed magnitude of the trade.

Let q denote the gross quantity of Bit involved in the exchange, and let τ denote the burn rate appointed to its direction. The quantity destroyed in that transaction is

δ = τ · q,    τbuy = 0.01,    τsell = 0.05.

On a purchase, the hook diminishes the Bit output owed to the swapper by δ and forwards δ directly to address(0). On a sale, the hook claims δfrom the inbound Bit, swaps it within the same pool against ETH, and burns the Bit so procured. Sellers therefore fund their own destruction; the protocol's buy-back pressure rises in proportion to sell pressure, not against it. The five-to-one disproportion between sell-side and buy-side burn is the central economic claim: so long as sales occur in any non-trivial measure, the marginal cost of exit exceeds the marginal cost of entry.

3. Supply

Let S(t) denote the circulating supply at time t, and let Δ(t) = S(0) − S(t) denote the cumulative amount destroyed. For any transaction i of gross size qi,

S(ti) = S(ti−1) − τi · qi.

Since τi, qi ≥ 0 and the contract exposes no mint, the sequence S(ti)is monotone non-increasing. Figure 1 plots the empirical descent of S(t) sampled at every Bit swap recorded on chain.

loading on-chain history…
Figure 1. Circulating supply S(t) after each transaction.

4. Network

The steps to run the network are as follows: (1) any participant may broadcast a swap intent to the v4 router; (2) the router routes the swap through the (ETH, Bit) pool; (3) before settlement, the bound hook computes δ = τ · q and rebates the pool by the burn amount; (4) after settlement, the burned Bit is forwarded to address(0) and a Burned event is emitted; (5) all observers verify the new supply by reading totalSupply() on the token contract.

5. On-Chain State

The values below are read directly from the chain every three seconds. Each row is a single contemplation of on-chain state; nothing is editorial.

Spot price
24-hour change
Market capitalisation
Circulating supply S(t)
Initial supply S(0)
Cumulative destroyed Δ(t)
Destruction ratio Δ(t)/S(0)
Destroyed via buys (1%)
Destroyed via sells (5%)
Sell/buy asymmetry ρ
ETH spent on buy-back

6. Recent Transactions

Each row corresponds to one Burned event emitted by the hook, in reverse chronological order. The amount column links to the originating transaction on the canonical block explorer.

SideBit destroyedMakerWhen

7. Position

No wallet connected. [connect] to view balance, cumulative contribution to Δ(t), and transaction count.

8. Conclusion

We have proposed a system for electronic cash whose scarcity is not promised but enforced — not by trust in an operator, but by the mechanics of the exchange itself. The contract has no mint, no owner, no privileged path. As long as anyone, anywhere, exchanges Bit, the supply contracts. The benefits of programmable money are retained; the trust assumption of discretionary burns is removed.

References

  1. Bit Token — ERC-20, no mint, no owner. 0x857c64D8F1fd3a6dE8E855a8C4F43CD7025DDd71
  2. Bit Hook — Uniswap v4 beforeSwap / afterSwap. 0x1d9B97b8C6419B34FE3b2b0344bf1a197A25A0c4
  3. Pool Manager — Uniswap v4 canonical. 0x000000000004444c5dc75cB358380D2e3dE08A90
  4. Universal Router — Uniswap canonical. 0x66a9893cC07D91D95644AEDD05D03f95e1dBA8Af
  5. Exchange — trade Bit ↔ ETH. Open Uniswap

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