Thesis Matt LuongoDeFiIOSG Keynote

hi my name is matt lewango and i am the ceo of thesis and the project lead of keep and tbdc i'm going to tell you a little bit about that last project but first i wanted to thank our organizers for having me um it's great to be among some great d5 projects here like maker dao and uma and i specifically wanted to thank iosg for the invitation to speak and welcome you all here today so let's talk a little bit about d5 d5 today is a 10 billion dollar market give or take which i'm sure we're all excited about the growth has been explosive and while we're taking a brief pause from farming food coins clearly we found something real here so the question is how far is it going to go and one of the things that i quickly notice is that it can't go a lot farther the way the market looks today so while d5 is a 10 billion dollar market so far uh ethereum has a market cap of only 43 billion so you quickly see um as d5 devours the block space on ethereum it's also running out of collateral um it still feels like eth is easy to get but we're kind of having to look around for um for real collateral and other alternatives and projects like maker need more collateral and are are desperate for trustworthy assets so there's an obvious one um for me is a big corner which is bitcoin um so obviously uh bitcoin is quite a bit larger than ethereum quite a bit larger than d5 it's an obvious next step for collateral in this space uh and over the past six months we've seen that its growth on ethereum has been explosive so one way we could frame this discussion is how do we bring d5 to bitcoin but i got to tell you as a bitcoiner i don't like that bitcoin is the first defy we don't need your your d5 in bitcoin so okay maybe it doesn't need to be uh quite so condescending maybe instead we can talk about how can we bring bitcoin and bitcoin users into d5 so not just the collateral and the liquidity but an entirely new set of users that we can use to grow our market so projects have tried before back in 2014 i remember reading about side chains and for the most part there's still vaporware today so in particular two approaches that we have seen that have made it to the market have been this idea of federations or federated side chains the idea of the federation is you get three of your buddies together you give them all of your money and they give you script they give you a token on another chain and you can use that you can you can buy and sell and trade with it and then when you come back to them the hope is that when you give your script back you'll get your bitcoin sometimes that works very well it gives you price exposure and frankly you can put together incredibly simple implementations so two popular um versions of this would be on the one hand liquid from block stream and then another might be wbtc some people might argue that wbtc is a one-of-one which is a is a fun discussion but either way simple simple implementations and price exposure of course there are some downsides um and you kind of have to ask yourself why are we in this space if you use the federation just deny you federation your funds are no longer seizure resistant collateral can be taken stolen by custodians but it can also be frozen by governments attacked by hackers and finally the reputation of the system is based on that of the counterparties so if people holding the system are good it will probably do okay but if they do have an issue suddenly you're worried about your collateral so another approach that a couple projects here tonight actually represent is synthetics and so the idea is you take a pile of one asset or multiple assets and from that you can sort of create other assets so you use a price feed and you say okay if you give me um you know ten dollars uh then i'm confident that um this token that you're giving me can represent one rmb for example because it's so heavily over collateralized and i know that if you're being dishonest the price is going to work out in my favor so synthetics are great um in particular you get censorship resistance again so die is a great example where you have a us dollar peg and it's it's fairly censorship resistant it can work with just ether as well as a variety of other asset types and you get price exposure on the chain um that's robust so those things are great now of course there are some downsides in particular and i would never say this about maker but some of these other schemes that i've seen they're dangerous they can expose users to undo um undue risk all sorts of leverage depending upon how the cloud rule is used uh but for me as a bitcoiner and someone who wants to get bitcoin is involved in d5 the biggest deal is that you can't redeem and settle physically for bitcoin so it doesn't really scratch uh the sidechain edge so what are my goals what are the goals of the system that we'd like to have well that's a censorship resistant fully bitcoin-backed one-to-one erc20 token so probably you would expect a token like that has uh the same price as bitcoin but the most important part is you bring bitcoin from your chain to ethereum or another and you're confident that the token on the other side will always be redeemable one to one for bitcoin so how do we get there well you take a lot of the ideas we've been talking about from federations and synthetics and you combine them with some cross chain magic called relayed spv and out of all that uh you get what we call a bonded multi-federated pack so this is in the naming tradition of side chains with a two-way pack so what do i mean federations in particular i mean many many federations for every single deposit in a system like this you create a new dynamic federation and the way that you prevent collusion from that federation is you bond all federation members with real on-chain assets then you use spv to basically turn ethereum into a bitcoin like client so now you can read bitcoin's history and actually validate so if anyone does anything dishonest in federation you know and then finally slashing and restitution so i'm sure you guys are familiar with slashing from proof-of-stake mechanisms um but we're not using it here to maintain any sort of consensus instead the idea is that if a custodian holds your bitcoin and they ever sign something that you don't want or move the bitcoin somewhere you didn't ask them to you have access to their ether via a smart contract and can seize their money so not only is there this huge disincentive for theft but you actually get paid back as a user in case there is an instant so the downside of a system like this is very robust for user deposits but naively it's pretty uh collateral hungry so you'll see here there's something like a 2.5x solid system collateral requirement fortunately there actually is clever use of bonds that get you down to as low as 1.4 x and the idea is uh well i'm not going to go all the way into it but part of the idea is that you can leverage these bonds across multiple deposits as long as you know the different people are in each group so our first version of this protocol that we call tbtc uses one of maker's oracles the btc price feed and it was designed and deployed for tbtc um and it's fantastic it's it's i'd probably say the most trustworthy oracle on ethereum but version two will even remove that aspect and we'll introduce a priceless feed mechanism so there's really not a centralized component here to attack so that's tbtc but since i first gave this talk tbtc has gone from an idea to reality so let me tell you a little bit more about its launch so we launched tbtcrc.one on september 22nd and we're really trying to take kind of counter to a lot of d5 a very safe and graduated approach so each week more and more bitcoin is allowed to be deposited this week the cap has just grown to a thousand uh and then each week after that it will grow by 500 btc until 3000 and then the cap will be removed the idea here is that um we we don't like as much as d5 allows us to earn yield it's dangerous for users to get too excited and rush and ape into a new system so we really wanted to just make sure that the fomo was kept low and that we could test to make sure that this was a really robust trustless side chain um tbtc is fully heavily audited by consensus diligence trailer bits as well as an independent researcher sergey delgado we've actually moved to a quarterly audit schedule now as well and we'll continue to publish as we go um tbtc is fully open source you can check it out on github uh you can actually see all of the bitcoin validation that's happening in solidity you can also look at all the off-chain clients that do the bulk of the heavy lifting so in addition all that um tbtc is insured if you want to deposit your bitcoin in tbtc you can purchase cover on nexus mutual and the idea is that the mutual can actually basically act like sort of a version of insurance where if you have any issues with your deposit and that was due to a smart contract bug you can go to nexus mutual and you can get get your funds recovered so we're hoping that what we've built is positioned to be the number one choice for d5 since we started tpdc wbtc has exploded and it's been fantastic it's really shown that bitcoin on d5 is something people want and so now it's time to make trust minimized bitcoin on defy something people need so if you're interested in integrating uh especially if you're involved in uh in mining and uh interested in looking at things like usd and rmb loans against your um against your bitcoin without a trusted counterparty please check us out go to tvtc.net developers i hope soon you'll be able to put tbtc in a maker vault and actually take out loans against it um something like two percent it's a great deal and finally join us tbtc.network or chat.tbtc.network would love to hear from you guys thanks a lot okay cut i'm going to do that last part one more time because i missed a couple slides so i'm so sorry editor and join us uh you can join our discord at chat.tbtc.network um we're on wechat twitter we're all over the place uh i'd love to hear from you um and then you know i think something that a lot of people are gonna be excited about uh and that i haven't talked a lot about yet in this uh in this discussion is something that we're calling the state drop so in addition to be bringing bitcoin to ethereum um we've actually open sourced the bridge and it is completely permissionless so anyone who wants to get involved and stake to actually run that bridge can do that so you can join an event called the stake drop and the idea is that it's been it's almost like an incentivized main net you put down eth you earn keep and you can stake to protect the bitcoin bridge finally really proud to say our community is just growing like gangbusters and our incentivized test net playing for keeps has already given users over 11 million keep which is something like seven or eight million dollars at today's prices so if you want to get involved with that and you have some skills as a developer or designer or community advocate please reach out we would love to have you and i hope you play for keeps thanks a lot you

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