> For the complete documentation index, see [llms.txt](https://pegasys.gitbook.io/pegasys-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://pegasys.gitbook.io/pegasys-docs/technical-details/economic-security.md). # Economic Security All operations performed by the network such as processing deposits, withdrawals and deployment of user funds into lightning channels require consensus. While a system of 3f + 1 nodes operating under partial synchrony can tolerate f Byzantine failures, this guarantee is insufficient for a network of nodes managing all of the user’s deposits. To achieve full collusion resistance we introduce a fraud-proof mechanism for a single honest party to objectively prove misconduct by a dishonest majority and slash their stake. The party submitting a valid fraud-proof receives all of the slashed staked, enabling quadratic scaling of safely manageable TVL with the total network stake. It immediately follows that the participants in the protocol must be slashable by a “higher authority” such as a Layer 1 blockchain with significantly more economic security. While it would be ideal to build such a system on the Bitcoin Chain, it is non-trivial due to the limited execution environment and stateless nature of the Bitcoin Scripting System. The next best candidate for a chain hosting the proof verification environment would be Ethereum\[7]. Assuming the existence of an independent and trustless relay like BTCRelay\[8] submitting block headers from the Bitcoin Blockchain to Ethereum, arbitrary state transitions on the Bitcoin Blockchain can be proven on the Ethereum blockchain. This paper assumes the existence of such a Trustless Relay and an accompanying on-chain BTC Light Client Contract for its fraud-proof constructions --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://pegasys.gitbook.io/pegasys-docs/technical-details/economic-security.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.