tBTC

The process is permissionless and non-custodial. Users can mint tBTC by depositing BTC into a TSS-controlled address and receive an equivalent amount of tBTC (an ERC-20) on Ethereum. To get their BTC back, users redeem tBTC, which burns the ERC-20 tokens and releases the BTC from custody.

• Transparent Audits: All deposits and redemptions are verifiable on-chain.
• Fixed 1:1 Peg: 1 tBTC is always redeemable for 1 BTC, minus network fees.

Security is enforced through cryptoeconomic incentives and automated audits. Signers are required to post a bond in T tokens that is significantly larger than the value of BTC they are securing.

• Slashing: Signers who act maliciously or fail to perform their duties have their bond slashed.
• Continuous Auditing: A network of Watchtowers monitors the system for discrepancies and can trigger recovery mechanisms.

Once minted, tBTC functions as a standard ERC-20 token, unlocking Bitcoin liquidity across the Ethereum DeFi ecosystem. Common integrations include:

• Lending & Borrowing: Use tBTC as collateral on platforms like Aave or Compound.
• Decentralized Exchanges (DEXs): Swap tBTC for other assets on Uniswap or Curve.
• Yield Farming: Deposit tBTC into liquidity pools to earn yield.

The system is built on two main components: the Bitcoin blockchain for custody and the Ethereum blockchain for the token and governance logic. A Bridge Contract on Ethereum coordinates minting and redemption, while the Random Beacon selects the committee of Signers.

• Interoperability: Designed to be chain-agnostic, with potential future expansion to other EVM-compatible networks.

Every signer in the network must post a bond in T (the native token of the Threshold Network) that is significantly greater than the value of Bitcoin they are authorized to custody. This overcollateralization creates a strong economic disincentive for malicious behavior. If a signer acts dishonestly or goes offline, their bond is slashed, and the protocol uses these funds to mint replacement tBTC, ensuring the 1:1 peg is maintained.

For each new deposit (minting a new tBTC), a random beacon selects a unique, fresh committee of signers from the pool. This randomization prevents long-term targeting or collusion, as adversaries cannot predict which signers will be responsible for which funds. The committee is re-formed for every operation, distributing trust and reducing systemic risk over time.

The protocol guarantees that any tBTC holder can redeem their tokens for the underlying Bitcoin. The process involves:

• Provable on-chain fraud proofs that allow anyone to challenge improper redemptions.
• Optimistic redemption with a timelock period, giving the decentralized network time to verify and challenge any suspicious activity before funds are released, adding a final layer of protection.

The protocol relies on a decentralized oracle (the Bitcoin SPV relay) to verify Bitcoin transactions on Ethereum. This oracle is maintained by the Threshold Network signers. Security depends on the cryptoeconomic security of this relay; a malicious majority could theoretically provide false proofs, though this is mitigated by the same bonding and slashing mechanisms that secure the signer network.

tBTC can be staked directly or via liquidity pool (LP) tokens to earn yield. Common strategies include:

• Direct staking in the Threshold Network to earn rewards for securing the bridge.
• Yield farming by depositing tBTC/ETH LP tokens from Uniswap into reward gauges on platforms like Convex or Stake DAO.
• Participating in liquidity mining programs launched by new protocols to bootstrap their Bitcoin liquidity.

While native to Ethereum, tBTC is bridged to other EVM-compatible chains via canonical bridges and third-party solutions, expanding its utility. Key integrations include:

• Arbitrum and Optimism for low-fee trading and lending.
• Polygon for high-throughput DeFi applications.
• This multi-chain presence allows users to choose the most cost-effective and performant network for their Bitcoin DeFi operations.

tBTC offers a distinct model compared to the dominant wrapped BTC (WBTC) standard, which is centrally custodied.

• tBTC: Decentralized, permissionless minting via a distributed signer network. No KYC required.
• WBTC: Centralized, permissioned minting via a merchant custodian (BitGo). Requires KYC.
• This makes tBTC a censorship-resistant alternative for users prioritizing decentralization, while WBTC often offers greater liquidity and speed.

A decentralized source of verifiable randomness used to select the signer group for each new tBTC minting deposit. This prevents manipulation and ensures the signer set is unpredictable and unbiased.

• Function: Provides a random seed for group selection.
• Source: Often implemented using a Verifiable Random Function (VRF) or a decentralized oracle network.
• Importance: Critical for maintaining the protocol's security and trustless properties.

The two primary user operations in the tBTC system.

• Minting: A user locks Bitcoin in a custody address controlled by the TSS signers and receives an equivalent amount of tBTC (an ERC-20 token) on Ethereum.
• Burning: A user sends tBTC to a burn address on Ethereum, which authorizes the TSS signers to release the underlying Bitcoin from custody back to the user's specified address.

The dominant centralized custodial alternative to tBTC. WBTC is a Bitcoin-backed ERC-20 token where a central entity (BitGo) holds all custodial Bitcoin.

• Custody Model: Relies on a regulated custodian and a centralized minting process managed by a merchant consortium.
• Contrast: Serves as the main counterpoint to tBTC's decentralized, non-custodial design philosophy. WBTC prioritizes regulatory compliance and institutional adoption.