Based on the verification capability of BTC, how can the WBTC technical solution be upgraded?

Author: Kevin He, Cofounder@BitlayerLabs

Background

Recently, there has been a widespread community discussion and concern about the transfer of control over the WBTC project.

The author has been involved in the construction of the Block infrastructure for many years and has personally built a centralized wrapped token system and an MPC-based custodial platform. Currently, they are building BTC’s native verification capabilities.

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

Based on practical system construction experience, the author has abstracted a simple architecture and security model for wrapped BTC products.

Next, the author divides the technical solutions of different products based on the degree of trustlessness, and points out that the wrapped technical solution based on BTC’s native verification capabilities is the future direction.

Event Review

Party

• WBTC

Implemented wraps of over 150K BTC (worth over 9B USD) and displayed proof of reserve on the website.

• Bitgo (the original controller of WBTC)

Announce the transfer of WBTC project control from BitGo to the institution related to Justin Sun, BiT Global, within the next 60 days.

Stakeholders

• The risk control team of Makerdao (DAI) ()

Expressing concern about the transfer of control mentioned above, considering the risks associated with WBTC, and will reduce exposure to the relevant protocol.

• Justinsun (the new controller of WBTC)

Promise not to touch bitgo’s reserves

Third Party

• Weidai （VC）

_weidai/status/1822338179640218081?s=46&t=d7GvsY4LzVKLbD34L3431w

Believe that validating bridges will be a better solution

• Liufeng （Media）

Questioning the qualifications of BIT global

The business model of Wrapped BTC

The business model of Wrapped BTC is actually very simple, as shown in the following figure:

wrap:

Convert from BTC to W-BTC.

wrap-house:

Indicates the operation mechanism of wrap, ensuring that the BTC deposited by users is minted into corresponding w-btc in a ledger (usually a blockchain, such as ETH), without more or less.

unwrap:

Convert from W-BTC to BTC.

unwrap-house：

The mechanism of unwrap ensures that users will receive the BTC on Bitcoin after destroying w-btc, neither more nor less.

Comparison of Trustless Degree

The above business and technical models have many dimensions. In the following, the author will compare the trust-free levels from the perspectives of wrap/unwrap.

Non-Trustless

A typical example is the current WBTC of BitGO, where the operation of wrap-house and unwrap-house is controlled by BitGo Custody.

Clearly, users need to trust that the BitGO custody service provider can always function properly.

Single Way Trustless

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

We can see that in x-chain (such as having complete verification capabilities, such as having EVM), wrap-house is relatively easy to achieve a higher level of trustless.

However, due to the limitations of technology at the time, unwrap-house could only improve security through threshold signature, regardless of the extent to which this pre-signature can be achieved.

Dual Way Trustless

The time has come to 2024, thanks to the pioneering efforts of teams including BitVM/Starkware in BTC’s native verification capabilities (including fraud proof and validity proof), with the practical landing of community teams such as BitlayerLabs, unwrap-house is expected to achieve trustless.

Among them, fraud proof is represented by BitVM and its derivative projects, which refers to the implementation of optimistic verification without OP_CAT, and the mainstream implementation scheme is the process of committing and challenging ZK verification.

Validity proof is to realize the direct verification of ZK under the assumption of OP_CAT opcode; With OP_CAT, the locked BTC will be controlled by what is known as a covenant-like contract.

Summary and Comparison of Solutions

Comparing the above-mentioned various technical solutions horizontally, it can be found that the technology solutions based on BTC validation capability will have better performance in two trustless aspects.

Summary

WBTC, which emerged in 2018, marked the beginning of bringing BTC Liquidity into the world of Decentralized Finance. Subsequent projects such as tBTC in 2020 have made some optimizations and improvements. Validation solutions represented by BTC’s native validation capability will perform better in two-way trustless scenarios.

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