> For the complete documentation index, see [llms.txt](https://cvnnt.gitbook.io/documentation/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cvnnt.gitbook.io/documentation/developer/assets/channel-nft-asset.md). # Channel NFT asset {% hint style="info" %} Note: This chapter is currently under development. {% endhint %} Channel NFT is an NFT-like dual type UTXOEVM asset on Covenant system - a synergetic merge of both main technological paradigms, a UTXO and EVM asset simultaneously. Channeled NFT is a non-fungible (unique) asset that represents the corresponding Bitcoin<>Covenant system channel and the state of underlying BTC deposit. #### How is it different from Lightning channels? Unlike Lightning Network channels (which are off-chain and stateless for most practical purposes), Covenant channels are fully on-chain-stateful. This means channeled BTC intrinsic data always keeps and reflects the current, exact state of the channeled BTC asset itself and the underlying Bitcoin deposit UTXOs - including ownership, splits, partial spends, or transfers. ### Channeled BTC as a smart programmable self-custody receipt Channeled NFT acts as a tamper-proof, intelligent self-custody safe deposit box receipt that also acts as the actual key to your private vault compartment. Channeled NFT is like owning a private vault full of gold 🟡 + holding the only smart key that can legally, verifiably and fully algorithmically divide ownership of portions without anyone touching the gold. * UTXO / Bitcoin side - The gold bars never leave your compartment until you (or the rightful receipt holder) decide to withdraw = your BTC UTXO remains untouched on Bitcoin until your exit. * Account-based (EVM) / receipt side - You can trade, split, sell, lend or use portions as collateral with automatically updating receipts (channeled BTC assets) - not by physically relocating the underlying gold / BTC every time. * NFT-alike uniqueness - Each receipt is permanently linked to one specific compartment + its real-time on-chain state / contents. It cannot be forged or duplicated. * True self-custody - No third party ever takes possession of your bars or keys - the vault is fully programmable, deterministic and only obeys the verified on-chain state and cryptographic instructions embedded in your receipt. #### Channeled NFT as a smart receipt flow Imagine you own a very high-security private vault facility with these special rules: 1. You never give your keys or your gold bars to anyone else - not the facility staff, not a manager, nobody. 2. The vault uses an advanced, programmable locking system that lets you divide, transfer or sell portions of your gold without anyone physically touching or moving the bars until you choose to take them out. You bring in 1 kg of gold bars and place them in your personal vault compartment, say, #789 (this is your original Bitcoin UTXO deposit). The facility instantly issues you one unique, non-copyable smart receipt (your Channeled NFT asset). This receipt has very intelligent properties: * It verifiably proves exactly you own exactly those specific gold bars sitting in your compartment #789. * It always knows the current exact contents (how many bars, how much weight, any splits or changes). * It is programmable - you can apply rules to it, for example: “If someone pays me the right amount, automatically re-assign ownership of 300 grams of my gold to that person, while I will control the remaining 700 grams.” * When that happens, no gold physically moves - the bars stay exactly where they are - but the smart receipt updates instantly. The receipt now reads “1 kg gold in total in compartment #789, where 700 g redeemable by the original owner (you), and 300 g is redeemable by the buyer” Later, when the buyer wants to release his portion, he shows the receipt, the vault’s smart lock verifies it cryptographically - only his 300 g is released to him, and your gold still stays verifiably yours in the receipt and your personal vault continues to hold your 700 g - nothing is lost or duplicated. ### Real-world example: Partial sale of deposited BTC Note: The fees and commissions are omitted in this example to keep the simplicity and focus on the core functionality. 1. Alice deposits 1 BTC to her new Covenant channel. She receives channeled NFT on her Covenant address (wallet), reflecting her 1 BTC amount, representing her full BTC deposit on Bitcoin (tied to her original UTXO). 2. Alice decides to sell 0.5 BTC from her channeled BTC deposit. She triggers a sell order functionality on Covenant system. 3. When the buyer (Bob) accepts and the order executes: * The Covenant system programmatically rewrites the state inside Alice's channeled NFT. * The underlying UTXO splits: * One new UTXO now points to Bob's Bitcoin address (his 0.5 BTC share). * The other UTXO remains tied to Alice's address (her remaining 0.5 BTC). 4. Alice's channeled NFT now only lets her operate with her remaining 0.5 BTC (the UTXO she still in control). 5. When Bob wants to withdraw his portion: * He triggers the exit functionality on Covenant. * The system algorithmically releases only his UTXO part to his Bitcoin wallet. * Alice's remaining UTXO stays as UTXO - linked to her Channeled NFT - untouched. This keeps everything deterministic, programmable, on-chain, and self-custodial: no middlemen, no off-chain promises, no wrapped tokens. The channeled NFT asset always has the verifiable on-chain state exactly of who owns what portion of the original deposited asset - and enforces it automatically and deterministically through the Covenant system' smart-contract algorithms and verifiable on-chain distributed logic.