Ethereum-based ERC20 tokens can be used to tokenize just about anything, including bitcoin (BTC). To that end, Ethereum’s rising tokenized bitcoin sector has been experiencing an explosion of activity in recent weeks.
One of the most promising newcomers to the scene is Keep Network’s tBTC token, which has been designed to be mintable using BTC and redeemable for BTC in trust-minimized fashion.
tBTC’s trustless model makes it attractive in Ethereum’s decentralized finance arena whose most dominant tokenized bitcoin project to date has been WBTC, which relies on a trusted third party in BitGo.
When tBTC launched to the public on May 11th, then, the DeFi community buzzed with excitement. However, just one week later tBTC’s builders initiated an emergency pause of the project after discovering a problematic bug in the token’s smart contract.
“The team triggered this pause after finding a significant issue in the redemption flow … when certain types of bitcoin addresses were used in redemption,” the Keep team explained in a post-mortem report.
The necessary move marked a considerable temporary setback for the tBTC project, but fortunately the redemption bug was discovered early enough in the token’s lifespan that amends can be made and tBTC can be hardened without any major losses of user funds.
Moving Forward
tBTC’s smart contract employs a 10-day pause mechanism for unanticipated emergencies like the one the token ran into this week. The Keep team activated the emergency pause on May 18th to give themselves a grace period to shield users and identify a suitable bugfix.
That’s precisely what Keep’s done since. In their post-mortem report, Keep noted they’d already secured more than 99 percent of the tBTC supply in the wake of the token system’s emergency pause and were on track to collect the remainder of outstanding tokens.
Moreover, developer James Prestwich has already submitted a potential fix to the redemption bug in Keep Network’s tBTC GitHub repository, which means tests are incoming.
Additionally, Keep confirmed they’d be engaging with the auditing specialists at Trail of Bits to “identify any additional areas of the system that may merit additional scrutiny.” If everything checks out, then tBTC can be brought back online in the not so distant future.
“In addition to the technical and process changes we’ll be making, in the coming days we will also announce how we plan on approaching a redeploy of the tBTC system,” Keep said.
Demand for Tokenized Bitcoin Growing
Once tBTC gets things back on track, it has major potential to experience further adoption in the DeFi ecosystem. Why? Tokenized bitcoin efforts are booming around Ethereum lately, and a trust-minimized project like tBTC is very attractive to the space’s decentralization purists.
Even still, though, more centralized projects like WBTC have been seeing a surge in adoption recently. That dynamic suggests there is certainly an appetite for a range of tokenized bitcoins on Ethereum.
Indeed, a MakerDAO user collateralized 1,000 WBTC in a Maker Vault on May 20th in order to draw out an automated self-loan of 4 million Dai. On the heels of that major activity, MakerDAO Rune Christensen took to Twitter to hail the event as just a sign of things to come:
“4 million Dai was just minted with WBTC in a single transaction. This really showcases the latent demand for non-ETH assets, and it’s the beginning of a broader trend of DeFi acting as an economic vacuum that will eventually attract almost all value to the Ethereum blockchain.”
In time, Keep’s tBTC may be voted in as an approved MakerDAO collateral type, too. And with other promising projects on the rise like PieDAO’s BTC++ and Ren’s renBTC, tBTC likely wouldn’t be the last tokenized bitcoin voted into Maker, either.
