From the perspective of WBTC’s business model, the necessity of technological upgrade

Original title: "WBTC: It's time to upgrade your technical solutions!"

Original author: Kevin He, Cofounder, BitlayerLabs

Background

Recently, the transfer of control of the WBTC project has sparked widespread community discussion and concerns.

The author has been building blockchain infrastructure for many years, personally built a centralized Wrapped Token system, and a custody platform based on MPC, and is currently building Bitcoin native verification capabilities.

In this article, the author will review the context of the event, mainly covering the actual actions and feedback of multiple parties, and presenting the facts themselves.

Based on the actual system construction experience, the author abstracted a simple architecture and security model for the Wrapped BTC product.

Next, the author divides the technical solutions of different products according to the degree of trustlessness, and points out that the wrapped technical solution based on Bitcoin's native verification capability is the future direction.

Event Review

Parties

• WBTC

https://wbtc.network/

Realized Wrap of more than 150K BTC (worth more than 9B USD), and implemented Proof Of Reserve display on the website.

• Bitgo (original controller of WBTC)

https://x.com/BitGo/status/1821927623494439130

https://blog.bitgo.com/bitgo-to-move-wbtc-to-multi-jurisdictional-custody-to-accelerate-global-expansion-plan-2ea0623fa2c8

Announced that the control of the WBTC project will be transferred from BiTGo to BiT Global, an organization related to Justin Sun, within the next 60 days.

Related parties

• The risk control team of Makerdao (DAI) (https://x.com/BlockAnalitica)

https://forum.makerdao.com/t/wbtc-changes-and-risk-mitigation-10-august-2024/24844?u=mhluongo

expressed concerns about the above-mentioned transfer of control, believing that WBTC poses risks and will reduce exposure to related protocols.

•  Justin Sun (new controller of WBTC)

https://x.com/justinsuntron/status/1822370692014485937

Promised not to touch Bitgo’s reserves

Third Party

•  Weidai (VC)

https://x.com/_weidai/status/1822338179640218081?s=46t=d7GvsY4LzVKLbD34L3431w

Believes validating bridges will be a better solution

•  Liufeng (Media)

https://x.com/fishkiller/status/1822455929247498459?s=46t=h607g0TWNMlmAGBrzTVpyw

Questioning the qualifications of BiT Global

Business model of Wrapped BTC

The business model of Wrapped BTC is actually very simple, as shown below:

wrap: indicates the conversion from BTC to W-BTC.

wrap-house: indicates the operating mechanism of wrap, ensuring that the BTC deposited by users has the corresponding w-btc minted in a certain ledger (usually a blockchain, such as ETH), no more and no less.

unwrap: indicates the conversion from W-BTC to BTC.

unwrap-house: indicates the operating mechanism of unwrap, which ensures that after the user destroys w-btc, there will be a mechanism for him to obtain BTC on Bitcoin, no more, no less.

Comparison of Trustless Degree

There are many dimensions to compare the above business and technical models. Below, the author will compare the trustless level in the two directions of wrap/unwrap.

Non-Trustless

A typical example is BitGO's current WBTC, the operation of wrap-house and unwrap-house are all controlled by bitgo custody.

Obviously, users need to trust that the BitGO custody service provider can always work properly.

Single Way Trustless

Next, let’s look at two representative projects that appeared around 2020: tBTC/renBTC.

We can see that in x-chain (for example, with full verification capabilities, such as evm), wrap-house is easier to do a higher level of trustless.

However, due to the limitations of the technical conditions at the time, unwrap-house can only improve security through threshold signatures, no matter how well the pre-signature is achieved.

Dual Way Trustless

The time has come to 2024. Thanks to the pioneering attempts of teams including BitVM/Starkware in Bitcoin's native verification capabilities (including fraud proof and validity proof), and with the implementation of community teams such as BitlayerLabs, unwrap-house will be expected to achieve Trustless.

The representative of fraud proof is BitVM and its derivative projects, which refers to the realization of optimistic verification without OP_CAT. The mainstream implementation plan is to commit to and challenge the ZK
verification process.

Validity proof implements direct verification of ZK under the assumption that the OP_CAT opcode is available; with OP_CAT, the locked BTC will be controlled by the so-called covenant (contract-like).

Summary and comparison of solutions

By comparing the various technical solutions mentioned above, it can be found that the technical solution based on Bitcoin's verification capability (Validation) will have better performance in the Trustless level in two directions.

Summary

The emergence of WBTC in 2018 opened the prelude to bringing BTC liquidity into the DeFi world. Subsequent projects such as tBTC in 2020 have made some optimizations and improvements. The Validation technical solution represented by Bitcoin's native verification capability will have better performance in two-way trustlessness.

WBTC, it’s time to upgrade your technical solution!

This article comes from a contribution and does not represent the views of BlockBeats.