— Matt Luongo (@mhluongo) April 27, 2020
Many have come to praise tBTC for their trustless approach to Bitcoin wrapping, and we expect to see the project make some major waves in the coming week thanks to proposals to introduce the new asset type to both Compound and Maker.
“tBTC uses Keep’s technology to achieve a high standard of security, including threshold ECDSA — which is audited and used by top crypto wallets and exchanges including Binance.”
Powered by Keep’s privacy layer, tBTC uses “keeps” – or off-chain containers for private data – to provide deep interactivity with private data. The Keep Network is powered by KEEP token holders – all of who are responsible for handling custodianship for tBTC in a trustless fashion. KEEP tokens are being released to the public for the first time on June 8th via an exclusive StakeDrop.
The launch of tBTC comes in tandem with a growing interest to bring Bitcoin to DeFi (and vice versa) and it’s interesting to consider which of these players will be successful in actually doing so.
To further explore the impact of this release, we took some time to chat with Matt Luongo – founder of Keep – in an exclusive interview.
As we move forward, I wanted to share exactly what that looks like so you'll know what to expect, when.
— Matt Luongo (@mhluongo) April 23, 2020
Can you tell us about how Thesis got started with Keep?
At Thesis, we were working on Fold for a long time. It was very exciting but the market wasn’t quite ready. The project was more about earning crypto and luckily Will Reeves – the CEO of Fold – was the perfect one to lead that charge.
— Fold 🙌 (@fold_app) April 9, 2020
It was at this time we started thinking about other projects. I asked myself – What else do I want to do in the space?
I started building a decentralized gift card exchange and exploring protocols like Omni, Counterparty and Openbaazar for distributed marketplaces. This got me thinking about how to automate gift card trading which ultimately led me to Ethereum.
However, when I started looking into where to store confidential information, I noticed there was very little infrastructure on the smart contract front. I recognized a need for a robust solution to store credit and gift card details and built Keep to do just that.
The cool thing about Keep is that it comes from the Bitcoin school of thought. We built the thing right which means it took a long time. This allowed us to build it in a way that’s truly censorship-resistant and tBTC is a great way to make use of that privacy layer.
As much as I like developers, I prefer end-users.
What would you like to say about tBTC?
For a long time, I was watching Liquid – an effort to make a Bitcoin sidechain. One of the things I didn’t like is that it largely relies on a ~15 party multisig. Essentially, you’re at a loss if those actors are malicious, meaning BTC is no longer a bearer asset.
Our goal was not to bring Bitcoin to Ethereum. Our goal was to bring hard money that is censorship-resistant to Ethereum.
It’s easy to build a synthetic. It’s not easy to build something that can defy malicious actors intervening.
wBTC was great for the time but Bitcoiner’s don’t trust it. RenBTC, pBTC and others are all interesting but come with tradeoffs. From the Bitcoin perspective, you ultimately want to use a solution with the fewest trust and econ assumptions. That safety is what I believe will make Bitcoiners happy with tBTC.
How does tBTC differ from something like RenBTC?
Both projects have lots in common. They’re both multi-computation based and the differences start to emerge at the actual pegged asset layer. Ren uses a custom MPC protocol across its entire bridge, essentially meaning it’s one huge multi-sig split across 12 different shards. If any of those shards break, 8-12% of the peg is at risk. With tBTC, if a deposit fails, that failure is localized.
With tBTC, there is no layer of off-chain coordination. We don’t use a separate chain or any new forms of consensus. Ethereum is the coordinate chain. When you mint tBTC you only need to talk to the Bitcoin and Ethereum chain.
Coming from a Bitcoin background there’s obviously a huge human element at play here. Can you speak a bit on that?
The tech is a pain in the butt and it’s definitely a little scary. Even if you’re familiar with BTC you don’t want to indulge in this whole new ecosystem. However, the silent majority of Bitcoiners are open to other assets.
Let’s be honest, everyone wants to make money – specifically Bitcoiners on their Bitcoin. Bitcoin was the first DeFi so this is a natural progression. With Bitcoin, you’ve defeated the bank. Now, let’s use it to buy a house!
bitcoin is DeFi
thanks for coming to my TED talk
— Meltem Demirors (@Melt_Dem) April 25, 2020
To any Bitcoiners reading this, it’s worth noting that we can have provably better privacy on Ethereum than any other confidential transaction schema on Bitcoin.
What have the conversations with Maker & Compound looked like so far?
With Maker, the ETH/BTC price feed was designed specifically for tBTC. However, it’s really important to note that getting to know the developers of a project is not the same as governance. Sometimes there’s overlap but it’s not always one of the same.
What we’ve done is made sure to get to know Maker and Maker’s developers both as a business and as a network. We’ve been talking to MKR holders and trying to see what their concerns are.
Create ETH/BTC Oracle + Whitelist tBTC
— Kris Jones (@KrisJ_Official) April 25, 2020
At the end of the day, there are only so many people who have ETH who are going to open a CDP. This is why stepping up to the next level with Bitcoin is quite compelling. If Maker adds support from tBTC, people can go straight from native Bitcoin to Dai directly through an Ethereum wallet.
In the space everyone wants to go mainstream we first need Bitcoiners to use DeFi and Ethereum.
Can you walk me through KEEP tokens and the role they play?
tBTC works on the labor of signers – they custody Bitcoin and put down collateral to know they won’t misbehave. Without this, any whale at any time could decide they want to kill the peg and do so with no repercussions.
What KEEP does for tBTC is add a permissioned gate to being a signer. KEEP is staked to sign for tBTC and run a beacon node. Over time, we’re hopeful that KEEP can slowly ease out ETH as such a high collateral requirement.
"People should have the freedom to make their own choices, & markets based on incentives produce better results than tightly regulated structures."
— Keep #tBTC (@keep_project) April 17, 2020
And what kind of fees can KEEP stakers expect to earn?
With KEEP, there is no inflation. If you are staking and running a random beacon, anyone who pays ETH pays you. You get fees in tBTC for signing.
When designing KEEP we thought – does this add security to the system? We believe a work token does that.
Every deposit backed gets a signer fee for as long as 6 months. The fees will start very low and 20% of the KEEP supply will be rewarded to stakers early on. There is a custody fee but it will start as low as 5 basis points and will probably move closer to 10-20 basis points in time.
What are the technical requirements to use Keep & tBTC?
To mint tBTC, you simply need to use Bitcoin from your own wallet.
To stake, you need to be comfortable running a machine that can stay up even if there’s a power outage. It’s remarkably similar if you were going to stake for Ethereum and we currently have support from teams like Bison Trail, Staked, Figment, Infinity Stones, and Stake Capital meaning delegation will probably emerge in the future.
What should people know about the KEEP Airdrop?
It’s a stake drop. You need to run a node to get Keep. Join us right now on testnet! Check out staking and let us know your thoughts.
Sign up here to participate: https://t.co/aWBiSs3h4E
— Keep #tBTC (@keep_project) April 14, 2020
What’s the larger vision here?
The way I see it, the future of Bitcoin could go two ways. First, Bitcoin continues to own everything. In the other, Bitcoin loses it’s first-mover advantage. In either case, I want to connect those changes together.
In the next 3-5 years, I hope that at least 10% of Bitcoin is pegged on Ethereum. If the maxis can relax on both sides – it’s a win for all of us!
In closing thoughts, it’s clear that Keep’s approach to trustless Bitcoin on Ethereum is quite interesting to say the least. With three years going into the development of the project, we can rest assured this isn’t something that was scraped together overnight.
Matt’s background in the Bitcoin community brings a much needed olive branch to hopefully alleviate some of the tension that frequently occurs on CT regarding Bitcoin and DeFi.
If one thing is for sure, coming out of the gate swinging with proposals to list on both Maker and Compound is one which should turn many heads in the wider DeFi community.
Overall, all the signs are pointing to Bitcoin making its way into DeFi (and vice versa) – all of which signals a significant increase in DeFi’s future market potential.
In the meantime, be sure to stay up to date on all things Keep by following them on Twitter!
Cooper is the Editor of DeFi Rate. He is an ambassador of Set Protocol and an active contributor to MetaCartel where he seeks to find emerging consumer-facing applications that propel the Ethereum ecosystem. He often works with projects as the Director of Fitzner Blockchain Consulting where he coauthors the weekly publication Token Tuesdays.
Like my writing? Drop me some gwei @ coopahtroopa.eth 😉