Bringing Bitcoin (and Bitcoiners) to Maker
Hello everyone, I’m Matt Luongo, the project lead for tBTC.
We’ve built a Bitcoin sidechain to Ethereum, meant to give Bitcoin the full superpowers of Ethereum and bring additional collateral to DeFi.
While I believe BTC can be great collateral for DAI, more importantly, I believe a native BTC on-ramp into the ecosystem can grow the protocol’s user base. An on-ramp into DAI and Ethereum that avoids centralized gatekeepers and unnecessary third parties is the best way to introduce Bitcoiners to the Ethereum ethos en masse and bridge the two cultures.
I’m excited to share what we’ve been working on for the past year and a half, tailored to the usecase of MCD. I’m looking forward to feedback from the community on how we can best serve the protocol, strengthen the peg, and work together to build our new financial system.
- Who is the interested party for this collateral application?
- Provide a brief high-level overview of the project, with a focus on the applying collateral token.
tBTC is an ERC-20 pegged 1:1 to Bitcoin. Instead of relying on a single custodian like wBTC or federation of custodians like Liquid, tBTC is supported by a decentralized bonded multi-federated peg model. The system is a supply peg designed so that tBTC can be minted or redeemed for BTC at any time without 3rd party friction.
Each time a Bitcoin is deposited into the system, the underlying Keep network’s random beacon selects a new random set for signers to form a federation. This signers set is bonded 150% the value of the deposit in ETH. The signers generate a key, BTC is sent, and after 6 block confirmations, depositors can post a BTC SPV proof to the Ethereum chain and mint TBTC. Redemption is the reverse: TBTC is sent to the system along with a small fee (5 bps) to pay the signers and once received, BTC is released and the TBTC is burned.
- Provide a brief history of the project.
The Keep team grew out of Fold, a popular Bitcoin app first launched in 2014. Keep has been building a system for decentralized signing and custody since 2017, and in late 2018 started building tBTC as the first app to launch on the Keep network.
The tBTC technical spec was released in August 2019 by Keep, Summa, and the Cross-Chain Group. tBTC has been live on the Ropsten testnet since January 2020, and will launch live on the Ethereum mainnet on May 11th, 2020.
- Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
Technical spec: https://docs.keep.network/tbtc/
Developer documentation: https://tbtc.network/developers/
Ropsten demo dApp to mint TBTC from testnet BTC: http://dapp.test.tbtc.network
tBTC contracts: http://github.com/keep-network/tbtc
JS library to build on the dApps atop tBTC: https://github.com/keep-network/tbtc.js
SPV relays: https://github.com/summa-tx/relays
Bitcoin SPV library underlying the relays: https://github.com/summa-tx/bitcoin-spv
- Link any available audits of the project. Both procedural and smart contract focused audits.
tBTC and Keep underwent a 6 week audit by ConsenSys Diligence, and is entering into an additional audit with Trail of Bits.
ConsenSys audit report: https://diligence.consensys.net/audits/2020/02/thesis-tbtc-and-keep/
We’ll share the additional audit results from Trail of Bits when they’re available.
- Link to any active communities relating to your project.
- How is the applying collateral type currently used?
At launch tBTC will be used as BTC-pegged collater in a number of DeFi apps like Compound, Nuo, Set, and Aave. tBTC allows native BTC to be used directly in these projects, without any redirects or special places to mint or burn.
- Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
tBTC as a protocol enables any KEEP holder to act as a partial custodian of the underlying BTC. No single organization bears legal responsibility for the collateral.
- Where does exchange for the asset occur?
After May 11th 2020, tBTC will be listed on OasisDEX, Uniswap, Radar Relay, Loopring, and Kyber, among other exchanges and DeFi projects. tBTC can also be directly minted and redeemed using the BTC and ETH chains.
- (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
It has, but providing private legal memos risks waiving attorney-client privilege. Intuitively, our understanding is that as a commodity-backed token, TBTC appears to be favorably treated in the US and similar jurisdictions.
We recognize that tBTC hasn’t existed for as long as candidate collateral like WBTC, and of course agree that confidence in security and market behaviour that comes with time must be a factor in approving assessing collateral MIPs.
Because we believe that a non-custodial model for Bitcoin collateral better fits the risk profile of Maker’s design, we’re proposing an additional guarantee on tBTC’s safety as collateral.
If tBTC is accepted as collateral, the Thesis team will additionally escrow $15M in KEEP (~12.5% of the supply) for the first 6 months to further backstop tBTC collateral for a debt ceiling up to 10M DAI. We’ll also pursue additional insurance for that period covering up to 500K DAI.