Title: [ARFC] Onboard tBTC to Aave v3 on Ethereum Date: 2024-05-13 Author: Aave Chan Initiative (ACI)
Summary
The proposal aims to onboard Threshold Network’s tBTC, to the Aave v3 protocol on Ethereum. tBTC is backed one-to-one with Bitcoin.
Motivation/Background:
tBTC is Threshold’s decentralized and permissionless bridge to bring BTC to the Ethereum network. 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 bridge to deposit their Bitcoin into the system and get a minted tBTC token in their Ethereum wallet.
Having recently acquired a Chainlink oracle, tBTC enables Aave users to have access to the only wrapped Bitcoin, which can be permissionlessly minted and redeemed, where the BTC that backs it is not held by a central intermediary, but is instead held by a decentralized network of nodes using threshold cryptography. This implies a fully decentralized and permissionless lending and borrowing experience for BTC (i.e. bridge native BTC to tBTC and borrow via Aave).
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 are being 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 for Aave:
- Further decentralization and trust minimisation in the Aave stack.
- A range of lending options for those who wish to earn yield on their BTC.
- Collaboration with the Threshold Network DAO, opening up the opportunity to incorporate other Threshold products (such as Threshold Access Control and thUSD) into the Aave offering.
- Preferable yields on tBTC through active incentive participation, boosting Aave protocol use, fees and TVL.
- Additional incentive allocation originating from Arbitrium’s LTIPP.
Specification
Ticker: TBTC
Contract Addresses:
Ethereum: 0x18084fba666a33d37592fa2633fd49a74dd93a88
Arbitrum: 0x6c84a8f1c29108f47a79964b5fe888d4f4d0de40
Optimism: 0x6c84a8f1c29108F47a79964b5Fe888D4f4D0dE40
Chainlink Oracle:
Ethereum: 0x8350b7De6a6a2C1368E7D4Bd968190e13E354297
Arbitrum: 0xE808488e8627F6531bA79a13A9E0271B39abEb1C
Optimism: 0x5a61374950D4BFa5a3D4f2CA36FC1d23A92b6f21
Risk parameters
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (tBTC) | 550 |
| Borrow Cap (tBTC) | 275 |
| Debt Ceiling | - |
| LTV | 73.00% |
| LT | 78.00% |
| Liquidation Bonus | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.0% |
| Variable Slope1 | 4.00% |
| Variable Slope2 | 300.00% |
| Uoptimal | 45.00% |
| Reserve Factor | 20.00% |
| Stable Borrowing | Disabled |
| Flashloanable | Yes |
| Siloed Borrowing | No |
| Borrowed in Isolation | No |
CAPO
| Price Cap |
|---|
| 4% |
Emission schedule
tBTC is one-to-one backed with real Bitcoin, meaning that there isn’t an emissions schedule, but a mint and redeem function that adjusts the supply of tBTC based on native BTC coming into and out of the system.
Risks
For tBTC, wallets are created periodically based on governance. In order for the wallet to move funds, it produces signatures using a Threshold Elliptic Curve Digital Signature Algorithm, requiring 51-of-100 Signers to cooperate. The 100 signers on each wallet are chosen with our Sortition Pool, and the randomness is provided by the Random Beacon. More can be found here - Wallet Generation Threshold Docs
The Threshold Council multisig is a 6/9 Gnosis Safe multisig with 9 unique signers that form the Threshold Network Council. The Council has limited upgrade privileges over the smart contracts. However, those privileges do not include any custodial power over deposited BTC:
Council Multisig Ethereum Address: 0x9F6e831c8F8939DC0C830C6e492e7cEf4f9C2F5f
Useful Links:
Llama Risk Report Collateral Risk Assessment Threshold BTC tBTC - HackMD
[Dune](https://dune.com/threshold/tbtc https://dune.com/sensecapital/tbtc-liquidity)
Disclaimer:
This proposal is powered by Skywards. The Aave Chan Initiative is not directly affiliated with Threshold Network and did not receive compensation for creation this proposal.
Next Steps:
- Publication of a standard ARFC, collect community and service providers feedback before escalating the proposal to the ARFC Snapshot stage.
- If the ARFC Snapshot outcome is positive, publish an AIP vote for final confirmation and enforcement of the proposal.
Copyright:
Copyright and related rights waived under CC0.
Off-Chain Vote
YAE
669.53K AAVE100%
NAY
7.33 AAVE0%
ABSTAIN
217.85 AAVE0%
Timeline
May 20, 2024Proposal created
May 21, 2024Proposal vote started
May 24, 2024Proposal vote ended
Feb 03, 2026Proposal updated