The decision was disclosed on May 18 by Matt Luongo, the founder of Thesis, a company that backs tBTC through the Keep project. TBTC was launched on May 16 on the Ethereum mainnet, lasting only two days before a temporary shutdown option was executed by the team.
While the team did not specify the reason for shutting down the protocol, it appears likely that this was due to a smart contract bug found by Antonio Salazar Cardozo, Thesis’ head of engineering. Luongo specified that the contract was audited multiple times, but this seems to not have been enough. “Definitely glad we caught this early,” he concluded.
Luongo emphasized that tBTC “will rise again,” likely after the team redeploys the fixed smart contracts. Cointelegraph contacted the developers behind the project to learn more, but did not immediately receive a response.
What is tBTC?
The tBTC protocol provides a “trust-minimized” bridge between Bitcoin and Ethereum to bring tokenized BTC without relying on a trusted federation.
As noted in the tBTC documentation, Bitcoin’s limitations make it difficult to create automatic and trustless bridges. Existing solutions like Wrapped BTC (wBTC) are generally custodial, with users having to trust the wBTC federation to redeem the tokens for real BTC. Despite wBTC seeing increased usage in decentralized finance, many of the protocols using it have come in support for tBTC — notably Compound.
TBTC uses a MakerDAO-like system of collateral bonds that must be put up by “signer groups.” The signers are responsible for holding the BTC on the Bitcoin blockchain, and facilitating any redemption process.
Each Bitcoin deposit is secured by ETH collateral bonded by the signers, initially amounting to 150%. Should they fail to execute a bridging transaction, the collateral will be liquidated and converted into tBTC according to the current exchange rate.
The system uses non-fungible tokens to represent claims to specific Bitcoin deposits, which generally expire after six months. During this period, the owner of the non-fungible token can redeem the specific deposit that created it. Deposits are also restricted to specific denominations, like 1 BTC, as it is necessary to ease the redemption process.
Some users have noted that the system is very complex, which likely made it difficult to catch the bug before launch.