Add collateral tBTC to ETH Market on Mainnet

Summary

Threshold Network propose launching tBTC market on Ethereum network.

General

Token Asset Name

tBTC

Project and Token Description

Background tBTC:

tBTC is a decentralized wrapped Bitcoin that is 1:1 backed by native BTC. Unlike other wrapped Bitcoins, the BTC that backs tBTC is not held by a central intermediary, but is instead held by a decentralized network of nodes using threshold cryptography.

tBTC is trust minimized and redeemable for native BTC without a centralized custodian. It can be used across the entire DeFi ecosystem.

tBTC can be used as collateral, liquidity, a store of value, and can be integrated with DeFi apps across all supported blockchains. As with other BTC wrappers, tBTC provides cryptocurrency traders and general users with a BTC-pegged token, that can be used to generate yield whilst holding native BTC.

  • Since launching the full 2-way BTC bridge in August, tBTC has scaled to 9 chains beyond Bitcoin.
  • tBTC is the only fully permissionless BTC bridge.
  • MCAP increased from 85m to 225m in 3 months.
  • Collateral for crvUSD.
  • About to go live on Aave.
  • Becoming the go-to bridged Bitcoin on Bitcoin L2’s with 706 BTC on Mezo and 229 BTC on BOB, with more partnerships incoming.

Background Threshold Network:

tBTC was created by a decentralized effort of contributors at the Threshold Network DAO, and extensively utilizes the Threshold Network’s threshold cryptography to create a secure BTC asset. tBTC is a product launched on Threshold Network, on which many other decentralized applications such as Threshold Access Control (TACo) and Threshold USD (thUSD) are built.

Threshold Network DAO was born out of the first on-chain merger between two decentralized protocols, Keep Network and NuCypher early in 2022. The DAO has successfully operated since that time, and supports an active community of contributors that work towards building tBTC liquidity and usability.

Benefits to Compound Community

  • Further decentralization and trust minimization in the Compound stack.
  • A range of lending options for those who wish to earn yield on their Bitcoin.
  • Collaboration with the Threshold Network DAO, opening up co-marketing opportunities to boost Compound’s reach.
  • Potentially enables direct deposits from BTC chain in the future.
  • Preferable yields on tBTC through active incentive participation, boosting Compound protocol use, fees and TVL.
    • Threshold Network has internally granted a 45k incentives budget to be distributed over a 3-month period.
    • A long-term incentives partnership TBC, depending on the success of this initial distribution.

Resources:

The proposal author their contact info

Ethan

The relationship between the author of the new market proposal and the token

Ethan is the Growth Coordinator for Threshold Network

Social channels Metrics (Size, activity and growth).
Twitter - 36,800 followers - https://twitter.com/TheTNetwork
Discord - 8,230 members - Threshold Network ✜

Market Risk Assessment

Market Cap of the token

$220,000,000 or 3,271BTC

Minimum and maximum market cap of the token within the last 6 months.

Max: 248,000,000 or 3,510BTC
Min: 87,500,000 or 1,169BTC

The largest exchanges where the token is listed and its respective liquidity

Curve Finance’s tBTC/WBTC pool with 30,000,000USD TVL - Curve.fi

The largest smart contracts balances of tokens and what those contracts do.

1 - 0xAB13B8eecf5AA2460841d75da5d5D861fD5B8A39 - Mezo lock contract
2 - 0x71518580f36FeCEFfE0721F06bA4703218cD7F63 - Verus Bridge
4 - 0x3ee18B2214AFF97000D974cf647E7C347E8fa585 - Wormhole Bridge
5 - 0xB7ECB2AA52AA64a717180E030241bC75Cd946726 - tBTC/WBTC Curve Pool
6 - 0x3F6cE1b36e5120BBc59D0cFe8A5aC8b6464ac1f7 - BOB Contract
8 - 0xdBAc78BE00503d10ae0074e5E5873a61fc56647c - Uniswap v3 tBTC/WBTC
9 - 0xf9bD9da2427a50908C4c6D1599D8e62837C2BCB0 - crvUSD

Provide the volatility of the token. Rolling windows of 1,3,6 & 12 month periods would be ideal. For more info see Gauntlet’s volatility guide.

Daily Vol 0.131748919

Monthly Vol 0.1374674821

Quarterly Vol 0.310040576

Yearly Vol N/A

tBTC vol

Total supply

Hardcoded to unlimited, 21 million in theory (supply of BTC).

Emission schedule

Mint and Redeem model

Note: Gauntlet will also pull live data to conduct their market risk assessment after the Checklist is submitted.

Decentralization

  • How is this asset distributed amongst token holders? List the top 10 holders, the percentage of each holder, and tag any of them if they are known.*
  1. 0xAB13B8eecf5AA2460841d75da5d5D861fD5B8A39 - Mezo lock contract - 20.7%
  2. 0x84eA3907b9206427F45c7b2614925a2B86D12611 - EOA - 15.4%
  3. 0x71518580f36FeCEFfE0721F06bA4703218cD7F63 - Verus Bridge - 11.0%
  4. 0x3ee18B2214AFF97000D974cf647E7C347E8fa585 - Wormhole Bridge - 10.4%
  5. 0xB7ECB2AA52AA64a717180E030241bC75Cd946726 - tBTC/WBTC Curve Pool - 9.4%
  6. 0x3F6cE1b36e5120BBc59D0cFe8A5aC8b6464ac1f7 - BOB Contract - 6.3%
  7. 0xF8aaE8D5dd1d7697a4eC6F561737e68a2ab8539e - EOA - 5.0%
  8. 0xdBAc78BE00503d10ae0074e5E5873a61fc56647c - Uniswap v3 tBTC/WBTC - 4.8%
  9. 0xf9bD9da2427a50908C4c6D1599D8e62837C2BCB0 - crvUSD - 2.9%
  10. 0x039c53a2F57586BB170b5BE59be65361657d2056 - EOA - 1.7%

List all of the privileged roles in the token contract. This can include whitelisted EOAs, Multi-sigs or DAOs.
N/A

Is it pausable?
No

Does it have a blacklist or whitelist?
No

Smart contract risks

Codebase & On-chain Activity:

Provide a Github repository for the underlying token contracts

Provide a test suite with code coverage.

Provide Etherscan links with verified contracts

Give the age of the token in days
Actively available on DEX’s 506 days ago, created 1041 days ago.

Given the number of transactions in the contract to date
34,133

Security Posture:

What audits, if any, were performed? Provide links to the reports if they exist.

Does the project have an active bug bounty program?

Provide emergency contacts with their responsiveness levels and response availabilities

security@threshold.network

List additional security and formal verification tools used in development

Slither

List all monitoring services used by the token, if any.

TRM Labs

Multi-Chain Strategy

Will the token include implementations on other networks?

tBTC is available on Ethereum, Arbitrum, Optimism, Polygon PoS, Base, Solana, Verus, BOB.

If so, will the tokens be natively minted on the other networks or bridged across?

Natively mintable on Ethereum and soon on Arbitrum.

Are there any mitigations in the contracts in case a bridge becomes inoperable or compromised?

There are 8 guardians in place who can halt bridging from L2s

Token contract Behavior:

Does the token have more than one address1?
No

Does the token use a compiler version greater than 0.8.0 or the SafeMath? If not, explain how the protocol deals with possible overflows and underflows

v0.8.4

During the execution of the token’s functions, does the token execute external code chosen by the caller or receiver?2 If so, please explain the reasoning behind this decision.

No

How does the token contract deviate from a standard implementation of ERC20? Any additional features that the Compound DAO should know about?

ERC20WithPermit to enable MisfundRecovery.

Is it burneable?

The token is burned when users redeem for native BTC. It also exposes EIP2612 permit functionality. See: solidity-contracts/contracts/token/ERC20WithPermit.sol at main · thesis/solidity-contracts · GitHub

Does the token contract have a fallback function? If so, when does it revert?3

It does not have a fallback

Does it have a fixed supply? If no, who can mint?

The token can be minted by users depositing native BTC.

Is it a rebasing token?

No

Does the token charge fees on transfers?

No

Does it implements any transfer hooks? Or hooks on any method?

No hooks

Is the contract performing arbitrary delegatecalls? If the answer is yes, indicate who can make these calls and to what contracts.

No

Is it flash mintable? If yes, please provide more information on this feature

No

Is it flash loanable? If yes, please indicate who offers the service.

No

What are the typical gas costs for calling each of the standard ERC20 functions?

Can be checked here Threshold Network: tBTC Token | Address 0x18084fbA666a33d37592fA2633fD49a74DD93a88 | Etherscan

Price Feed Behavior

Is the price feed supported by ChainLink?
If not, what entity is responsible for posting price updates? List names and addresses which may update the price feed?

Yes - 0x8350b7De6a6a2C1368E7D4Bd968190e13E354297

How often will price updates be posted?

1-hour updates

At what price difference threshold will price updates be posted?

2%

Can the AggregatorV3Interface functions for this price feed ever revert when called?

The price feed’s AggregatorV3Interface will never revert unless it is deprecated with no latest price answer.

Does the bytecode of the custom price feed match an audited version?

Yes

Upgradability:

Is it upgradeable?
No

Who is authorized to make an upgrade?
N/A

Can an upgrade happen instantaneously or is there a time-lock delay?
N/A

Which components are upgradable?
N/A

How does the upgradeability design work? Who manages it and are how upgrades performed?
N/A

Does it emit an event when the implementation is updated?
N/A

Community Check

The community should review the following items before approving a new asset.

  • Veracity of the info provided.
  • Correct configuration of any new contracts (oracle, custom price feeds, asset).
  • Documentation quality.
  • Favorable results in the execution of the token test suite or integration simulations.

Additionally, we look forward to the community to suggest:

  • Collateral Factor
  • Reserve Factor
  • Borrowing Limit
1 Like

As an old compound user I would love to see the risk of wBTC done away with, I remember from the beginnings it was my number one worry for protocols integrity. If it comes onchain I’ll definitely vote yes :raised_hands:t3:

Gauntlet - Initial Parameter Recommendations for tBTC on v3 USDC Comet

Simple Summary

If the community decides to list tBTC on the USDC Comet on Mainnet, Gauntlet recommends the following risk parameters:

Parameter Value
Collateral Factor 76%
Liquidation Factor 81%
Liquidation Penalty 10%
Supply Cap 150

Analysis

Liquidity

Asset Dex Category TVL (mil) URL
tBTC curve 25.41 Link
tBTC curve 7.99 Link
tBTC uniswap_v3 5.12 Link
tBTC balancer_ethereum 1.01 Link

Total: $36.53M

$31.54 of the total liquidity is against WBTC, the other Curve pool is a tripool against crvUSD and wstETH.

Supply Cap and Liquidation Penalty

Given the above liquidity sources, we recommend setting the supply cap that would cause 5% slippage i.e half of the liquidation penalty although our methodology allows for higher supply caps. This means that the total slippage should the entire supply get liquidated needs to be < LP. Gauntlet recommends a supply cap of 530 tBTC (~$9,000,000), this swap would cause a slippage of ~5% vs a liquidation penalty of 10%

The tBTC can be redeemed for the underlying BTC within 3-5 hours.

Liquidation Factor and Collateral Factor

The Maximum drawdown against USDC is 8.5% along with a 30D Log volatility of 46.27%. tBTC’s maximum drawdown against WBTC is 1.65% with an annualized 30D log volatility of 3.9%.

tBTC/USDC

tBTC/WBTC

Given the lower liquidity of tBTC when compared to WBTC, and the higher 30D Annualized Log vol for tBTC/USDC when compared to WBTC/USDC, we recommend discounting the existing WBTC’s CF and LF by the persisting 30D Annualized Log vol between tBTC/WBTC (~4%) as the new CF and LF for tBTC. The recommended new CF and LF for tBTC is 76% and 81%.

Bridge Risk

Gauntlet would like to flag that tBTC relies on bridging mechanisms (Wormhole) for mint and redemption, this exposes the protocol to smart contract and systemic risks should the protocol be compromised.

Thank you @Gauntlet for the recommendations, we will start the coding process for the asset and update the community accordingly.