About tBTC Coin

tBTC price today is $36,849 with a 24-hour trading volume of $526,362. TBTC price is up 16.6% in the last 24 hours. It has a circulating supply of 1.8 Thousand TBTC coins and a max supply of 1.81 Thousand. Kraken is the current most active market trading it.

What is tBTC?

tBTC is an ERC-20 token on the Ethereum blockchain that is fully backed by bitcoin at a rate of 1:1. The supply of tBTC is always backed by an equal number of bitcoin kept in reserves.

tBTC has been designed to allow bitcoin holders to participate in Ethereum’s Decentralized Finance (DeFi) applications. Users wishing to utilize their bitcoin on Ethereum can use the tBTC decentralized application (dApp) to deposit their bitcoin into the system and get a minted tBTC token in their Ethereum wallet. They can also use the dApp to redeem their bitcoin.

How was tBTC founded?

tBTC is an open source project supported by groups including Keep, Summa and The Cross-Chain Group. tBTC was launched on May 11th, 2020.

On May 18th, 2020, a bug was detected in the redemption codes and the protocol was forced to stop all new deposits for 10 days. Funds were not at risk and immediate action was taken to return funds to those involved. 

tBTC went live again in September 2020.

How does tBTC work?

The mechanics used by tBTC is fairly similar to how MakerDAO creates DAI. For example, tBTC relies on price feeds, bonds, and arbitrage opportunities to keep the system running honestly.

 

The starting point of minting for tBTC is to create a deposit request. This request is a transaction to a smart contract on tBTC’s host chain, and indicates that the sender requires a signing group backed wallet, mediated by a deposit.

Once the deposit request is received, the signing group is created by randomly selecting a set of signers to back a Bitcoin wallet. Within the system, there will be three signers responsible for approving the transaction. For a transaction to proceed, it will require all three signers’ approval. 

As a protective mechanism, signers must stake 150% of the amount of bitcoin being deposited by the user before they could generate a public key. Also, the signers must have enough bond available to back a deposit in order to be chosen for a signing group.

After a deposit has been requested and a signing group formed, the depositor will be assigned a non-fungible token unique to the deposit called the tBTC Deposit Token, or TDT, granting them ownership of the deposit. This ownership comes with the exclusive right to redeem the deposit from the moment it is funded until the deposit term is reached.

Once the tBTC system has a wallet address available for a given deposit request, the depositor can send their bitcoin to the wallet address generated by the signing group. After the transaction has been confirmed by the Bitcoin chain, the depositor has to issue a transaction to the host chain proving that the deposit has been funded.

If the signing group fails to provide a public key within the given time window, the depositor can notify the system and receive their deposit back, taken out of the bonds that the signers put up as part of the signing group selection process. If a deposit proof is not received within a given time window, the signing group can notify the system and retrieve their bonds. The protocol’s smart contract will hold that bond until the bitcoin deposit is successfully redeemed by the user. 

It is important to note that bitcoin deposits are only possible in fixed-sized lots and signers’ stake are denominated in ether. Because the system is designed to only receive deposits in a few predefined lot sizes, depositors should send the exact amount of bitcoin or risk losing their funds. If a depositor wants to deposit more than the supported maximum lot size, they will need to create multiple deposit requests and fund multiple deposits. 

Once the deposit is fully qualified through sufficient proof of the funding bitcoin transaction, the depositor will receive tBTC along with a TDT. The TDT is required to redeem a locked bitcoin deposit and without it, users can’t get the bitcoin back. TDTs are transferable. Holders may trade them or use them as collateral elsewhere. 

How to swap tBTC for bitcoin?

When users wish to redeem tBTC for bitcoin, they have to submit a redemption request transaction to the smart contract which includes their bitcoin wallet address. During which they will repay the outstanding amount of tBTC and signer fees. 

The beneficiary receives their signer fees and the rest of the tokens are burned, including the TDT and tBTC. Next, the signers wait for the transaction to be confirmed on the Ethereum blockchain. Finally, the signers produce a signature which can be submitted to the Bitcoin network to send bitcoin to the specified user address.

How safe is tBTC?

tBTC ensures safety and transparency by managing counterparty risk. It uses a decentralized system of “signers’ groups” that allows tBTC to process transactions safely and transparently without a trusted middleman. To remove single points of failure, “signers” must operate in groups of three which mimics a multi-wallet architecture. All three signers must approve a transaction for it to proceed. As an incentive for people to fill this role, signers receive a fee of 20 basis points for every tBTC “minted” in exchange for a bitcoin. 

tBTC uses a method called a random beacon: a decentralized random selection tool for selecting signers from a pool in a cryptographically secure and decentralized way. This beacon is designed to be tamper-proof.

Additionally, signers must post a “bond” equal to 150% of the amount of BTC being deposited by the user in order to fulfill their role; this acts as collateral to ensure good behavior. 

This bond is used in a few cases:

  • To liquidate deposits in the case of under-collateralization

  • To punish a signing group that fails to produce a signature for the system when requested

  • To ensure a depositor is refunded if the signing group fails to form

What are other ways to acquire tBTC?

If users choose not to mint for tBTC, they can purchase tBTC in the Ethereum blockchain like any ERC-20 token through centralized exchanges such as Kraken or decentralized exchanges such as Uniswap.

 

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