Thread by @jcliff42

1/ I just dove into the newly announced tBTC project from the @keep_project team led by @mhluongo which @scalarcapital backed. The project will help bring Bitcoin to Ethereum’s decentralized finance world. Highlights from the white paper below. 👇

https://twitter.com/mhluongo/status/1162481737525583873

2/ Motivation for the new project comes from the fact that many find Bitcoin lacking in sufficient ability to be utilized by smart contracts or act as collateral for DeFi, a popular new area that my cofounder @ljxie lays out in her recent post lindajxie.com/2019/08/07/the….

3/ The project follows in the footsteps of BitGo’s WBTC and Blockstream’s Liquid, which both issue fully backed BTC tokens via the federated trust model. One signing group controls all of the underlying BTC. tBTC sees this as a weakness.

4/ tBTC offers two improvements to minimize required trust in any specific entity or group of entities. It dynamically creates the signing group for newly minted TBTC rather than having one fixed group. Also the issuing group must post significant collateral which deters theft.

5/ tBTC has several prerequisites which Keep provides: a well distributed work token for sybil resistance during signer selection, a random beacon for signer selection to avoid targeted attacks, and multiparty computation primitives for distributed key generation across signers.

6/ Current limitations on Bitcoin script sizes places a size cap of 20 for signing groups. In the future with Schnorr aggregation and MAST, this could be increased substantially, but timelines for these improvements are not currently known.

medium.com/scalar-capital…

7/ In order to keep the signing group honest, they must post overcollateralized bonds before they’ll be allowed to sign. It’s possible to use the Keep work token (which will be used to select signers), but it may not have the needed liquidity during the bootstrapping phase.

8/ Therefore, the signing group will need to post ETH in order to be eligible to mint new TBTC. The protocol includes mechanisms for tracking the collateral value via price oracles and liquidating the TBTC if the collateral gets too low.

9/ The price oracles will be centralized at first, but later run by the ecosystem. They plan to upgrade to a system similar to @MakerDAO’s oracles where it incorporates multiple feeds from distinct sources into one.

10/ tBTC depends on signing groups putting collateral at risk. It’s clear they will need to be compensated for this risk and operating costs. The current plan is to pay them 0.5% per year. Demand to pay is unknown but I look forward to seeing how it plays out!