> 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/how-it-works/what-is-a-covenant-channel.md).

# Stateful channels

Covenant system lets users move real Bitcoin into any EVM chain and back - deterministically, programmed, trustlessly, and without ever wrapping, bridging or giving up custody.

The key is stateful channels - Lightning-inspired mechanics that in Covenant evolves into something far more powerful: fully stateful, programmable channels with deterministic, onchain-verifiable state.

Stateful channel technique powered by Covenant system is the unbreakable on-chain link that guarantees self-custody over BTC assets and verifiably proves ownership everywhere on integrated EVM / \*VM networks.

<figure><img src="https://content.gitbook.com/content/IrCs7se0X60UkwSdNUVw/blobs/8WMsiQnuGJcOZyl10xqe/image.png" alt="Covenant system on-chain stateful channels with Bitcoin blockchain for self-custody BTC DeFi " width="563"><figcaption></figcaption></figure>

### What is a Covenant stateful channel?

In general, channel is an established concept for Bitcoin payments with lower fees, utilized in Lightning network. However, these ordinary channels lack crucial property - state. All of the Lightning channel operations between channel creation (depositing BTC) and channel closing (withdrawing BTC) are stateless - you can't observe the in-between operations with that BTC onchain.

Covenant channels are significantly improved due Covenant core technological functionality. Covenant channels are as native to Bitcoin as Lightning channels are: Covenant itself is a Bitcoin-native system at its core. What is more important, Covenant channels and all the channel operations are fully stateful due to Covenant intrinsic original EVM and smart contract support.&#x20;

### Stateful channel properties

* BTC is deposited and released with ordinary Bitcoin scripts.&#x20;
* On the Bitcoin blockchain channel is a usual BTC (UTXOs) locked safely with Bitcoin script.
* Channel always stay on-chain and fully auditable.
* It is owned by the user as a transferable asset (the channel\_NFT)
* It is represented outside the Bitcoin as a unique channel\_NFT non-fungible asset (user' deposit proof of ownership) + mintable fungible hBitcoin (underlying BTC deposit value)
* It supports stateful EVM logic – lending, trading, looping, anything
* It can be freely moved to any integrated EVM chain while the original BTC never leaves Bitcoin.

### Why Covenant stateful channels push the limits of BTC DeFi

Using Covenant system' channels real BTC can flow freely into and out of DeFi safely, seamlessly, deterministically and without custody risks, expanding EVM DeFi functionalities with Bitcoin-based opportunities.

* No wrapping required
* No bridges, operators, no trusted middlemen or federated authorities
* Deterministic programmed mechanics
* Transparent smart contract logic
* Zero challenge periods or liquidity delays
* Full self-custody and onchain proof at every step
* Works with any EVM / \*VM chain integrated with Covenant system
* Users can even trade the “ownership” and “value” separately on open markets
* For self-custody channels, you release on Bitcoin network the exact same BTC you deposited - via the same UTXO

Stateful channels provide pass-through state wiring of the original deposited BTC asset from the Bitcoin network to all integrated networks and DeFi ecosystems where the BTC is moved.