The Keep Network has released details for the second iteration of its “low-trust” Bitcoin tokenization protocol, tBTC.
In a blog post on Sunday, Keep Network developer Evandro Saturnino outlined some changes the protocol is considering to address its previous collateral issues.
In the second iteration of tBTC, the stakers are expected to only lock Keep and not Keep and Ether (ETH) and make changes to the wallet generation mechanism. The protocol allows users to tokenize their Bitcoin (BTC) for use on the Ethereum network.
While Saturnino notes that the changes “offer a way to lose weight a lot[ing] the collateral ratio of the operational assets, ”he warns of new risks in connection with the proposed upgrades.
To offset a “low risk to retention” resulting from the changes, Saturnino continues to use insurance coverage pools to protect against malicious auditors and describes the pools as “perfectly suited to preventing fraud in tBTC v2”.
tBTC works with collateral from ETH in a network of blockchain validators and parties who individually contribute to the minting and securing of the asset while keeping the activities in the blockchain under control. Saturnino explained:
“In this mission, tBTC has emerged as the first solution that integrates tBTC into the Ethereum network in a trustworthy and truly decentralized manner. It uses the Keep Network infrastructure, with which data can be stored and calculated that even before itself are hidden. “
As soon as the user sends a request to mint tBTC and a deposit bond, a randomly selected signature group generates a public BTC wallet address to the user. The members of the signing group are selected from a suitable pool of signatories who have agreed to deposit ETH as collateral.
The tied ETH is an incentive to align the interests of the signatories and can also be used to punish members for wrongdoing. Signatories are required to deposit 150% of the total deposit size in ETH as collateral in a mechanism similar to the MakerDAO and Dai stablecoin system.
The developer admitted that the team has learned a lot since the tBTC mainnet launched for the second time in September 2020. Within a few days of its initial launch in May 2020, the Keep log was temporarily shut down after an error was found in the redemption codes. The protocol also has problems with scaling, added Saturnino.
Despite the support of the venture capital giant A16z and other big names, Keeps tBTC could not appeal to DeFi users with a circulation offer of only 1,293 tokens, according to CoinGecko.
Existing bitcoin tokenization solutions have seen significant growth and popularity over the past year. According to DeFi Llama, Managed Wrapped BTC is currently the second largest DeFi protocol with a TVL of $ 8.7 billion. Non-custodian competitor renBTC has also amassed a TVL of $ 926 million and is currently the 27th top DeFi project.
