Summary: Is BTC.b the Key to Enabling BTC DeFi?
<!-- SC_OFF --><div class="md"><p>BTC.b is a recently added BTC token native to the <a href="https://twitter.com/avalancheavax">Avalanche network</a>.</p> <p><strong>In episode 23 of the</strong> <a href="https://twitter.com/DefiPodcast"><strong>DeFi podcast</strong></a>, hosts <a href="https://twitter.com/DefiPodcast">JF Saine</a> and<a href="https://twitter.com/M0xrrissey"> Jared M</a> welcome Michelle Tian, a product manager at <a href="https://twitter.com/avalabsofficial">Ava Labs,</a> who has a background in strategy, credit, and structured products. In this podcast, she explains what having native BTC can enable on the AVAX network.</p> <p>Read our notes below to learn more.</p> <h1>What is BTC.b?</h1> <ul> <li>Native BTC that has been bridged from BTC network to AVAX network.</li> <li>BTC handles UTXOs (condition specifying currency remaining after a transaction is executed) which is why BTC wallets are HD (hierarchical deteriministic).</li> <li>AVAX core wallet has simplified the process so that the transaction is sent into one wallet for the user, rather than multiple as would be the case on a bitcoin wallet.</li> <li>BTC bridging only available on core wallet.</li> </ul> <h1>Intel SGX</h1> <ul> <li>Intel SGX is hardware technology that creates trusted execution environments.</li> <li>These execution environments function off-chain, preventing other parties from having access to minting or burning of tokens.</li> <li>Instead, 6 of 8 bridge nodes are needed to approve any transaction.</li> <li>AVAX uses collateral checks so that more tokens can’t be minted than what is available on the AVAX bridge itself.</li> </ul> <h1>Warden System</h1> <ul> <li>Bridge has 8 nodes run by wardens including: <a href="https://twitter.com/ankr">Ankr</a>, <a href="https://twitter.com/BlockdaemonHQ">Blockdaemon</a>, <a href="https://twitter.com/ChainstackHQ">Chainstack</a>, <a href="https://twitter.com/protofire">Protofire</a>, <a href="https://twitter.com/AvascanExplorer">Avascan</a>, <a href="https://twitter.com/BwareLabs">Bware Labs</a>, <a href="https://twitter.com/HalbornSecurity?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">Halborn</a>, and Ava Labs.</li> <li>6 of 8 groups have to agree on a transaction for the smart contract to actually mint or burn tokens.</li> <li>These independent companies listen for incoming transactions to validate and verify so they can send to off-chain enclave.</li> </ul> <h1>AVAX Bridge</h1> <ul> <li>Most bridges are very smart contract reliant.</li> <li>AVAX bridge has very limited smart contract use on AVAX side, none on ETH side.</li> <li>AVAX bridge contracts similar to <a href="https://docs.openzeppelin.com/contracts/4.x/erc20">Open Zepplin</a> ERC-20 smart contracts.</li> <li>4 audits have been completed in the year since the bridge has been around.</li> <li>Security features include bridge monitoring, collateral checks, 24-7 on call engineering support, <a href="https://www.pagerduty.com/">pagerduty</a>, and <a href="https://www.yubico.com/">Yubikey 2FA</a>.</li> <li>Team has also implemented a bug bounty program.</li> <li>Many bridge exploits can be traced back to 1 operator being compromised.</li> <li><a href="https://www.trailofbits.com/">Trail of Bits</a> recent research claims that ETH network can be compromised with 2 comprimised operators, BTC with 4.</li> <li>Bridge has very low latency, due to using the Avalanche consensus algorithm.</li> <li>Bridge UI shows different stages of bridging process, is transparent.</li> </ul> <h1>BTC.b vs BTC Lightning</h1> <ul> <li>Lightning uses state channels which allows fast and cheap off-chain payments.</li> <li>Lightning network abstracts difficult transactions onto a Layer 2 ledger.</li> <li>BTC.b allows many DeFi opportunities for trading, borrowing, and lending.</li> <li>BTC.b TVL is ~$60m compared to BTC Lightning Network TVL ~$100m.</li> <li><strong><em>JF</em></strong></li> <li><a href="https://twitter.com/Moremoneyfi">Moremoney</a> (AVAX native borrowing protocol) sees increasing demand for BTC.b integrations.</li> </ul> <h1>BTC.b vs WBTC</h1> <ul> <li>WBTC (wrapped BTC) is centralized, users have to submit request to 1 of 17 merchants who can process minting or redemption.</li> <li>The BTC is held in custody in exchange for WBTC.</li> <li><a href="https://bridge.avax.network/">BTC.b minting</a> is unrestricted, can be done at any time.</li> <li>BTC.b require flat $3 fee to mint compared to WBTC which involves merchant and custodian fees which scale with transaction size.</li> <li>Avalanche doesn’t profit from this fee, it’s just used to cover transaction costs.</li> <li>BTC.b is more accessible as it doesn’t need KYC or AML like WBTC does.</li> <li>Ava Labs wants to grow the BTC ecosystem on AVAX.</li> </ul> <h1>BTC.b Growth</h1> <ul> <li>BTC.b was recently added to <a href="https://twitter.com/AaveAave">Aave</a> and <a href="https://twitter.com/BenqiFinance">Benqi</a> (borrowing and lending dApps).</li> <li>WBTC.e (AVAX native WBTC) has around ~$110m TVL, which shows more growth for BTC.b</li> </ul> <p><strong><em>JF</em></strong></p> <ul> <li>AVAX Network TVL is ~$1.5 billion, acquiring 1% of BTC in BTC.b would triple AVAX Network TVL.</li> </ul> <p><strong><em>Jared</em></strong></p> <ul> <li>BTC.b is much closer to holding actual BTC than WBTC as it’s not centralized and can be held in self-custody.</li> </ul> <h1>Subnets</h1> <ul> <li>Team is working on cross-subnet communication which would open up many new use cases with arbitrary data passing.</li> <li>This involves communication between subnets and AVAX C-Chain (EVM compatible chain).</li> <li>Team will be building a VM (virtual machine) library which will enable subnets to add code easily with very little technical activity, could be as simple as 3 command lines.</li> <li>This enables tokens, NFTs, governance information to be relayed across bridges.</li> <li>This could bring more dApps and functionality into the AVAX ecosystem.</li> </ul> <p><strong><em>Jared</em></strong></p> <ul> <li>Building a subnet is currently just as difficult as building a bridge.</li> </ul> <p><strong>This summary was originally posted on</strong> <a href="https://revelointel.substack.com/"><strong>The Daily Bolt</strong></a><strong>, which is a 100% free no-nonsense daily crypto newsletter by Revelo Intel.</strong></p> </div><!-- SC_ON --> &#32; submitted by &#32; <a href="https://www.reddit.com/user/ReveloIntel"> /u/ReveloIntel </a> <br/> <span><a 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