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26 May 2023•
7 min read
We recently had the chance of hosting a Discord AMA with the Threshold Network, the team responsible for developing tBTC. The session offered a great opportunity to explore, understand, and delve deeper into the world of tBTC, how it works, its advantages, and the future plans of the Threshold Network.
To read the full AMA, head over to our dedicated Discord channel. Below you can find a summary that has been slightly edited for better readability:
A: So assuming you have some native BTC that you want to bridge across, you first go to the Threshold dashboard and connect your Ethereum wallet. The dashboard will generate a Bitcoin deposit address where you can send the BTC you want to bridge.
After that, you'll make a second transaction on the Ethereum side to confirm your deposit and initiate the minting of tBTC.
You'll need to wait for a sufficient number of block confirmations on the Bitcoin side as well as a processing period for the Threshold network to check that everything is correct. Once that's done, the tBTC will show up in your Ethereum address and you're ready to DeFi!
We have a more detailed walkthrough available here.
The “magic” of tBTC is that the native Bitcoin you deposit isn't custodied by a central service provider like with wBTC/renBTC/etc. Instead, the deposit addresses are generated by stakers running nodes for the Threshold network, meaning the deposit addresses are large multisigs with 100 signers.
A: The tBTC bridge is laser focused on delivering the most secure, robust, and permissionless bridge from Bitcoin to Ethereum. Working with Wormhole allows us to retain that focus but, at the same time, bridge Bitcoin everywhere else, including L2s like Arbitrum, Optimism, and Polygon.
Beyond EVM chains, we also super excited about using Wormhole to bring tBTC to major non-EVM chains, Solana, Cosmos, and Sui being a few we're especially excited about.
A: Yes, on the Ethereum side, depositors are required to perform a transaction to confirm their deposit and start the tBTC minting process. The Threshold network then processes the transaction to verify everything is correct (that is, it confirms a legitimate deposit on the Bitcoin chain) before the tBTC appears in your wallet.
A: tBTC v1 employed 3-of-3 signer sets and required signers to overcollateralize with ETH at 150% of the BTC value, which resulted in high minting costs for users.
On the other hand, tBTC v2 replaces the 3-of-3 signer sets with signer sets of at least 100 nodes on the Threshold Network, removing the need for signers to post ETH collateral.
v2 makes tBTC a viable competitor to wBTC, but unlike wBTC, it is a permissionless and decentralized solution.
A: There are incentives for LPing tBTC on Curve and there will be LP incentives live on various L2s shortly as the Wormhole collaboration picks up!
A: The design space for Bitcoin bridges consists of three approaches:
(1) Trusted party bridges (2) Economically secure bridges (3) Probabilistically secure bridges
(1) Trusted party bridges (BTCb, wBTC, multiBTC) are cheap to run and easy to scale because they simply rely on the reputation of the operator. The downside is that they are not permissionless (e.g., BitGo decides whether or not to allow you to mint/redeem wBTC) and if something happens to the bridge operator, the results can be catastrophic. See renBTC and soBTC as recent examples, where the custodied BTC was completely rugged as a fallout of the FTX/Alameda debacle.
(2) Economically secure bridges (tBTC v1, Interlay BTC, Stacks BTC) are decentralized and permissionless. They ensure the safety of the underlying BTC by requiring the signer sets custodying the BTC to post collateral in some other asset (e.g., 150% of the value of the custodied BTC in ETH for tBTC v1). While this provides a high degree of safety for users, the downside is that this approach is fundamentally unscalable because of the extreme capital intensity. tBTC v1 quickly topped out its minting capacity and you can see similar issues with Interlay BTC struggling to gain meaningful TVL. Unfortunately, this inherent lack of scalability fundamentally limits the usefulness of economically secure bridges as viable DeFi primitives.
(3) Probabilistically secure bridges (tBTC v2) eliminate the over-collateralization requirements of economically secure bridges while preserving permissionlessness and decentralization and providing a sufficient level of security to maintain supply integrity. This is achieved by massively expanding the signers sets, regularly rotating deposit addresses, randomly selecting signers from a well-distributed staker pool, and backstopping everything with an insurance fund (called coverage pools in tBTC v2).
The significant unlock here is that probabilistically secure bridges like tBTC v2 can scale competitively with trusted party bridges like wBTC, but in a decentralized, censorship-resistant, and permissionless way.
A: For tBTC, the next milestones are sweeping and redemptions back to native BTC.
Once that's finished, the bridge will be fully operational and we can look into potentially adding some other interesting things like support for BRC-20 tokens and Ordinals (imagine trading Taproot Wizards on OpenSea!)
Another interesting project that's built on top of tBTC is thUSD, a fork of Liquity but with tBTC as collateral. Essentially, a Bitcoin-backed stablecoin.
A: Speed to market in terms of bringing Bitcoin everywhere (major L2s and non-EVM chains, not just ETH L1), while allowing Threshold to focus on our bread and butter of bridging Bitcoin to Ethereum. BTC is the best crypto collateral so it should be available everywhere there is a thriving DeFi ecosystem: tBTC + Wormhole makes that a reality.
Is there a lower or upper limit to tBTC mints?
The minimum mint is 0.01 BTC, with no upper limit.
Amount or duration of deposit?
The current minting time for tBTC is ~ 1 hour. Redemptions are expected to be live very soon. There will be no maximum duration of deposit. The Threshold Network generates new wallets periodically that custody the underlying Bitcoin by leveraging a decentralized network of independent nodes operated by T token holders. If a wallet ever fails a liveliness test, is too old, or meets other criteria then the system is designed to move the underlying Bitcoin from an old wallet to a new one.
Is the process for redemption similar to minting?
Yes, maybe even a little simpler. The GitHub Redemption section says (**https://github.com/keep-network/tbtc-v2/blob/main/docs/README.adoc**): A user with an account balance <<redeeming,supplies>> a Bitcoin address. The system decreases their account balance and releases the equivalent amount of Bitcoin to the user from the redeeming Bitcoin wallet. The maximum redemption size is capped by the size of the largest wallet, and any redemption bigger than that will need to be split into multiple redemptions.
Are there any major pitfalls for users known at this time?
The only real drawback, in my opinion, is redemptions not being enabled quite yet, but this was a fair trade-off to get tBTC v2 live and available for renBTC users who were left without a decentralized and scalable solution once the fallout from SBF and Alameda revealed that REN was actually centralized. Interestingly, Matt Luongo, the co-founder of Keep and mastermind behind tBTC, frequently tried to raise centralization concerns for years about the REN protocol but those unfortunately fell on deaf ears.
A: Least Authority, a well-known web3 security consulting firm, completed an audit of tBTC v2, encompassing all of tBTC v2’s security-critical components.
TL;DR: No security vulnerabilities were found in tBTC v2’s key components, including its MaintainerProxy smart contract, Vault, Sortition Pool, HeartBeats Mechanism, or Wallet Redistribution.
Please find a link to the full blog post here with more details: https://blog.threshold.network/least-authoritys-audit-of-tbtc-v2/
A link to the audit report can be found here: https://leastauthority.com/blog/audits/audit-of-keep-network-tbtc-bridge-v2/
A: Bitcoin, everywhere. BTC is the gold standard crypto asset and a maximally permissionless, censorship-resistant, and decentralized representation of it should be accessible to every DeFi ecosystem. The collaboration with Wormhole makes that a reality a lot faster.
A: Yep, any address that holds tBTC can redeem for native BTC, not just addresses that initially minted. In other words, if you buy tBTC on Curve or somewhere else you can redeem it for BTC!
A: Check out Threshold Network’s Twitter or Discord for more information.
That's a wrap! A massive thank you to everyone who chimed in with their questions and to the Threshold Network team for their insights on tBTC. Couldn't make it? No worries - this summary should bring you up to speed. Stay tuned for more AMAs!
Here’s your chance to get in on this one.
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