BUIDL Bitcoin on Ethereum with tBTC: A Simple, Trust-Minimized Peg – Carolyn Reckhow

hi everyone my name is Carolyn I've been working in the crypto space for about five years started out with consensus was one of the first employees their most etherion thing that you could do was there for about three years help them grow up to a thousand folks and then I decided to leave and go join a Bitcoin maximalist startup cos I that was with Jameson WAP Nick Newman Elena from treasure and while I was there I got a really great refresher on the fundamentals so like the importance of security resiliency and above all else censorship resistance and individual sovereignty but at the end of the day I'm a technologist I'm a bit ler first in a Hodler second so I said goodbye to the Bitcoin only world and was really excited to meet the keep team Matt Longo few others they're working on a project that brings the best of both worlds together Bitcoin and etherium t BTC we've been working on this for about a year now with folks like James Prestwich suma the cross chain group and I'm here to tell you a little bit about it so why are we here here in the space I think some of us came here for the unstoppable code some came for the global world computer and now we've got a new meme defy really exciting achievement this week we hit 1 billion dollars locked in D Phi which is great super exciting for this meme but when you really start to think about continuing to grow deify you realize there's a ceiling that we're gonna head right when you look at that 1 billion in D Phi next to the twenty nine billion aetherium market cap like there is a very real ceiling there and we should start to think about how can we continue this growth how can we continue to bring valuable assets in collateral unchain and you know especially with lots of d fire projects like maker for example that require a lot of collateralization this is a real problem some people are thinking about assets like securities more traditional assets I'm not interested in that I'm interested in trustless digitally native assets so with that in mind what's the next best and biggest pile of collateral Bitcoin bitcoin is still just a little bit bigger than a theory oh there's a lot of potential there so how can we do this how can we bring defy to Bitcoin now that's kind of a paternalistic question right if there are any bitcoiners out there watching I could probably be like Bitcoin doesn't need defy but when you really think about it Bitcoin is the original dfi store of value your own bank digital cash we're just saying let's take it one step further let's do loans let's earn some interest and another way to think about it how do we bring Bitcoin and Bitcoin users in to defy now I think that aetherium is really uniquely positioned to be like this interoperability hub and we should actually be thinking about how can we bring real world assets all types of assets into aetherium to continue to grow TFI and provide value to the ecosystem people have been trying this for a while I bet some of you oh geez out there remember side chains we've been talking about side chains since 2014 earlier and largely they've been vaporware there are a few layer 1 interoperability plays out there that are coming soon but in terms of a pure Bitcoin to aetherium bridge nobody's really done this in a simple elegant way there have been some hacks though Federation's this is one thing that we've been doing for a little while now Federation is a pretty simple concept you gather a group of people together and you have to trust them and they hold your Bitcoin and all of the transactional stuff happens on chain Federation's are great because you get price exposure right you get that exposure to pick coin which is what you need for defy and it's a really simple implementation I bet any of you guys out there that have touched solidity could whip up something like wrapped Bitcoin W BTC super quickly which is great you get your price exposure except well why did you get into this space in the first place I don't know about you but I didn't get into this space to you know have to ask permission to transact to have some sort of intermediary there I got into the space because I care about censorship resistance sovereignty and consent and the moment you turn to a federation based peg that requires trust you just throw all of that out the window you throw out censorship resistance you throw out institutional roadblocks it's it's goes against everything that crypto stands for in my opinion so synthetics are another cool hack I'm sure you guys are familiar so the way synthetics work you lock up a bunch of eath and then there's an algorithm that maintains a peg to the price of an asset these are great because it's censorship resistant right if you're using a synthetic that it represents a stock for example you can be sure nobody's gonna steal your stock which is cool but there are always downsides a couple risks I see here one is that this can get dangerous right if you're continuing to stack synthetics on top of each other you're you've got undue FX risk there and the more that you stack these synthetics with all these defy protocols the greater the chance that we're gonna experience some sort of catastrophic Black Swan event in defy like for example if I asked everybody out here what how much ether they'd be willing to lock up to feel confident that that ether would be worth more than one Bitcoin in six months that's a hard question I feel like I'd get a lot of different answers here so it's tough and then the second thing is you can't redeem synthetics for Bitcoin which is important right if I'm talking to my AG Bitcoin or maximalist friends that work at Casa they don't care about synthetics on aetherium they in fact don't like those at all and if they're gonna use a system like this they need to know that they're using real Bitcoin and that they can redeem trust ously at any time for real Bitcoin so what are we trying to do here what is missing in these previous attempts we're trying to build a censorship resistant fully Bitcoin backed ERC 20 token no censorship resistance no institutional middlemen just trust listless trustless implementation how are we gonna do this so I'm actually gonna show you how very quickly we've got a video of a demo here okay here we go so this is a really simple DAP this is actually a DAP that touches both the etherium chains you can see meta mask there and the Bitcoin chain and what we're doing here in the beginning is we're initiating a deposit and when we do that we're painting the etherium chain and we're asking for a group of signers to assemble this is the Federation it comes together they're chosen randomly and you're asking them to give you a Bitcoin address all right these group of signers produce a pkh hash and then in a moment there you see Bitcoin address you're gonna pay that use your green wallet or whatever and then at this point it's pretty simple you do have to wait for six blocks for a confirmation so if we were really doing a demo this would take some time we shortened this for you but then after you get those confirmations there's only one last step this one here is you're gonna submit the proof so this is an SPV proof and basically what you're doing is you're telling the etherium chain here's the proof that I actually did send the Bitcoin it's there it's safe now to send t BTC to my wallet there you go alright so that's how what's the idea behind all this so we're calling this a bonded multi federated peg which is a lot of words for something so simple but basically what this means is you're looking at the Bitcoin chain in your checking behavior you're having a lot of different to Federation's brand new ones you don't have to trust like 11 out of 15 like 12 institutions the same Federation's and then if you are participating in the system as a signer you're gonna put up you have an eighth bond you need to have skin in the game so to go into a little bit more detail you have this new dynamic Federation every time you request one Bitcoin and that Federation is assembled randomly selected randomly using a random beacon it keep we've built a random beacon have been working awhile on it and once this Federation is selected randomly you're gonna bond them right and this is a way to prevent prevent misbehavior and you have some real Unchained recourse talk a little bit more about that in a second and then lastly you're reading the Bitcoin history to validate and if you've done any solidity out there you know that in an area map we're not actually reading the Bitcoin chain what we're doing is we're asking somebody off chain to read for us and let us know so what happens if you misbehave right you're one of the signers and you cheat so we're gonna slash you and in most slashing it's slashing in most consensus mechanisms it's it's punitive you're slashing and then you're burning those tokens to the ground you really want people to feel the pain and our system we don't have that punitive element instead we're using the slashed funds to maintain the peg so if someone cheats we take their ether we go to the market we buy Morty BTC and use that to keep the peg so there's definitely some collateral requirements here at first we've got a bit more of a naive solution where we're using 2.5 X collateral this is a big number but wanted to be honest here and put the largest one really if you think about it you could argue that it's only 1.5 X eath because there is some liquidity they are on the etherium side but we are thinking about some clever ways to to shave this down and one of the ways that they've come up with is basically and if you have some of the Bitcoin depositors collateralized against each other you can actually get it down to one point 4x collateral and you know it's still expensive but it's definitely less expensive than getting boxed and it's stressful so well almost Stressless this is the last piece in terms of the whole design and this is price were chol right if we're doing this kind of slashing and liquidation mechanism we need an accurate price feed for the Bitcoin to either price for version 1 we're going slightly centralized we're using makers media Nizer Oracle definitely the industry standard and you know we just wanted to get it out there because working on a descent flip decentralized price Oracle it's a hard problem but we are hacking together some things we've been whiteboarding for a while this we're calling it a price list feed mechanism which is really you know I'm very excited to share with you guys more about it but I won't get too into it now that's gbtc it's an open-source project to keep network along with Summa and the cross chain group are all collaborators and I've got a few teasers for you guys here at the end so one thing that we've recently added is increasing the lot sizes so in the beginning when we built this we had it a single lot size just one Bitcoin so you could only bring one Bitcoin into the system and mint 1tb TC which is kind of a lot so we heard you and we've built smaller lot sizes into the smart contracts so now you can build some of these smaller sizes into your DAP point one point zero one keeps going uh and this one I am most excited about the team has been working really hard for I mean it's like total of two years keep network and T PTC so it's awesome to finally be live on Rob's ten connected and to add to that excitement the folks at compound finance are really interested in what we're doing and they've actually behind the scenes have integrated their smart contracts in with T BTC so that means that not only can you hack hack on gbtc use Bitcoin in your DAP you can also hack and use CTBT see in your DAP so you can earn interest on Bitcoin so let's build we're at each Denver it's all about building TPT CJ s is open source these are our libraries if you're participating in the hackathon today take a picture save it check it out TBT see we're really determined to be the best and the little the easiest way to add Bitcoin into your DAP so give us feedback we want to know how we're doing and if you're hacking check out our bounty we've got a three thousand don't eat today in collaboration with compound we want to see the best Bitcoin to defy experience that you can build if you go there to this github slash keep Network slash Denver you'll see a link to the bounty itself you'll have a whole bunch of documentation and resources to help you get going if you're interested I'm also gonna be around so you can come ask me we've got some colleagues here there's Laura and Corbin and a few others Nick one of our lead developers is gonna be here and then mm-hmm Adam and Max are their names yes from compounder here not here yet but we've got a lot of people that can help last bit here so we're gonna be announcing our main net q1 launch date and all of our defy integration partners really soon so make sure to keep an eye on us on Twitter follow the TB TC hashtag you know and if you have a defy project out there and you're interested in having Bitcoin on your project integrating with T PTC come talk to me I'm here all weekend that's my telegram feel free to ping me would be great to talk and then don't forget to follow along for further updates so I am on twitter at sea rock ow you can follow matt project lead em @ MH Luongo on twitter we got just one last teaser for you guys if you're interested pay attention because really soon we're going to be letting everybody know how you can use your eath to bring Bitcoin to defy so stay tuned thank you that's it [Applause] I'll leave this up in case people want to check it out there any questions I think I have a little bit of time that was a question about our plan for the lot sizes yes so that implementation data or the DAP that I showed you guys we're calling that our implementation DAP so it's essentially just a lovely front end that our designer Michael built but just to show what the minting and redemption process is like and we're only gonna keep that DAP at one lot size but or one Bitcoin lot size but we've built in the capability of doing like you know logarithmically smaller lot sizes so if you're building adapt you can use this greater than yeah great question so we're actually working with a couple of different potential partners on building a more institutional front end that batches a whole bunch of Bitcoin together and mints a whole bunch at once so we're gonna have some partners to recommend you towards if you have a whole bunch of Bitcoin that you want to mint at once yeah so that's the question was about what prevents the random Federation's from taking your Bitcoin and they're they're not going to take their Bitcoin because at in the beginning they are over collateralized right there is a 1.5 X / collateralization in eath so there's this eath bond they have skin in the game and if anybody does misbehave what we do is we slash them we take that eath we buy morty BTC of the market to keep the back yeah great question the question was what's what sees incentive to be a keep signer to sign 40 BTC and so a couple things there one is fees right maybe you noticed it in the demo but there's a little note that says there's a small fee every time you you meant and right now we're keeping those fees pretty low it's gonna be 20 basis points per Bitcoin but we imagine as demand grows for this the fees could potentially go up but those fees are going directly to signers and then you know there's also there's also an element around the keep token which is a work token that's necessary to run keep t BTC but I won't get too much into that but it's basically fees and then there's some network incentives I think that might be all I have time for but yeah check it out ping me on Twitter on telegram I'll be around [Music] you