⚡ Why DLCs Don’t Work for Surge

Discreet Log Contracts (DLCs) are a clever way to make Bitcoin respond to external data like the BTC/USD price - by letting an oracle decide which outcome becomes valid. That works well for single-event contracts (like “if BTC > $60k, pay Alice”), but Surge vaults are long-lived financial state machines. They need to handle multiple transactions - repayments, partial liquidations, and timeouts - from same vault address.

1. Outcome Explosion

In a DLC, every possible oracle result must be predefined with its own payout path. For lending, this means mapping every potential liquidation price to a unique address.
Example:

Outcome 1 → 110000k
Outcome 2 → 109000k
...
Outcome 10 → 100100k ✅ (Sweep)

In a live system with continuous BTC price updates, the number of outcomes grows exponentially. Surge vaults need a continuous collateral ratio, not a finite list of precomputed addresses.

2. One Keypath per Outcome

DLCs work by revealing a single keypath - the one matching the oracle’s outcome. Once that path is used, we can’t reuse the same address after the first event.

3. Non-Persistent Lifecycle

When a DLC settles, the address is “burned” - funds are swept, and the contract ends. A dVault keeps the same Taproot tree until final closure. Each dVault encodes its logic from the start.

Summary