> For the complete documentation index, see [llms.txt](https://docs.stroom.network/stroom/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.stroom.network/stroom/phase-0-soft-launch/capital-flow-and-minting-redemption-lifecycle.md).

# Capital Flow & Minting/Redemption Lifecycle

Stroom facilitates the tokenization of interest-bearing Bitcoin (BTC) on Ethereum through the minting of `strBTC`. The process begins with the deployment of Lightning Network infrastructure and access control middleware for LN Channels Curator. Once Liquidity Providers (LPs) deposit BTC, Stroom with Custodian validates the transaction and authorizes the minting of `strBTC` on Ethereum. LPs may optionally engage in DeFi strategies to enhance yield. Upon withdrawal, `strBTC` is burned, and the underlying BTC is released by a custodian, which is enforcing the escrow agreement. 

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**1. Infrastructure Setup (Pre-Processing Stage)**

* **Lightning Node Deployment:** A secure Lightning Network Daemon (LND) node is provisioned by a BTC custodian.
* **Access Middleware Initialization:** Channel Curator is granted permissioned access through a hosted Macaroon Middleware Manager, enabling secure interaction with the custodian's node.

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**2. BTC Deposit & strBTC Minting**

* **Deposit Detection:** When BTC is deposited into the custodian’s Lightning node, Stroom and Custodian detect the transaction.
* **Minting Authorization:** Upon confirmation, Stroom issues a cryptographically signed minting message used to mint `strBTC` in the smart contract.
* **`strBTC` Minting:** LPs interact with the Ethereum smart contract to mint `strBTC` using the signed message.

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**3. Yield Optimization (Optional)**

* **DeFi Strategy Participation:** LPs may allocate their strBTC into supported DeFi protocols such as DEX liquidity pools, lending and restaking platforms, or vaults to earn additional yield with different risk profiles.

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**4. Withdrawal Process**

* **`strBTC` Burn:** To initiate a withdrawal, LPs burn their `strBTC` on Ethereum via the smart contract.
* **BTC Release:** After the burn is validated, the equivalent BTC is released back to the LP from the custodian via the Lightning Network.

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**5. Incentive Mechanisms**

* **Stroom Points:** LPs earn points based on the BTC liquidity provided and their participation in DeFi strategies involving `strBTC`.