Keep Network Review: KEEP, tBTC, and the Private Data Layer.

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Keep Network is building a scalable, open-sourced privacy layer for blockchain, with interoperability between chains. This layer is infrastructure that provides secure data storage, data encryption, and private smart contracts. It is composed of off-chain private data containers called Keeps. “Keeps” are smart contracts that let other smart contracts interact deeply with private data. Keeps can store and process data, that is hidden even from itself!

A private data layer will unlock new applications for blockchain. It has implications in: credit scoring, health records, loan risk assessment, marketplaces for digital goods, and even allows the creation of dead man’s switches. A privacy layer will allow businesses and individuals to exploit blockchain tech, without the fear of exposing their valuable secret data.

“Keeps” are also blockchain agnostic. They allow for interoperability between many of the top chains. Keeps can digitally sign transactions between blockchains using ECDSA. T-ECDSA allows BTC to be controlled from the ETH chain. Keeps can even be used as custodial wallets, allowing for cross-chain trading.

Keep Network and Summa have partnered to create their first application called tBTC. tBTC will serve as an equity bridge between Bitcoin and the protocols built on other blockchains like ETH, and EOS. tBTC holders can hold Bitcoin, and still participate in Etherum defi.

…In the article below, i’ll discuss: the Keep Network, the Privacy Layer, as well as Keep and Summa’s first application tBTC.

Who is Developing Keep network and TBTC?

The Keep Network privacy layer is being built by Thesis, whose co-founders are are Matt Luongo and Corbin Pon. Financial backers of Keep Network include: Andreesen Horowitz, Polychain Capital, and Tim Draper. Contributors to Keep’s tBTC project include Summa, whose founder is James Prestwich. Together, Thesis and Summa have formed an “interoperability working group” called the Cross-Chain Group.

What are the goals of keep network?

Keep.network has goals to solve blockchain privacy using off-chain data containers, private smart contracts, and a native token for rewards and collateral. They are releasing a new type of smart contract which stores private data in an off-chain container, called a “Keep”. A keep allows applications to interact with private data, without fully exposing its contents. These smart contracts can provide secret data, encrypted files, or verify identity, when a certain criteria is met. This is done securely, using multiple privacy technologies, with the ability to operate at scale.

Multiple Privacy Technologies are used to create a Keep

Keeps use a combination of privacy technologies like Zero-Knowledge Proofs, secure Multi-Party Computation (sMPC), homomorphic encryption, and secure hardware. Keeps can publish private data to the blockchain, which is encrypted by a users public key. The private data is segmented and multiple private keys are generated to later access the private data. The contract owner can even delegate access to the private contract to other users or destroy the contract. In their whitepaper, they explain how these technologies in combination can create more decentralized, censorship resistant system to safely handle this private data.

Keeps support Interoperability via t-ECDSA

Keeps allow decentralized digital signatures via t-ECDSA. This lets contracts communicate cross-chain. “T-ECDSA keeps facilitate decentralized group signing with multi-party threshold signatures, even if group signatures are not available on the host chain.” Keeps are like a bridge between two chains, allowing for cross-chain communication. Many of the top chains use t-ECDSA including: BTC, LTC, XRP, BCH, BNB, and DASH.

Keep Network’s Native Token KEEP

Keep Network has its own native token called KEEP. It is used to power apps on the network, for node staking, and for users to earn rewards for performing jobs on the network. Node operators must stake KEEP tokens as collateral. They are also rewarded in KEEP tokens, when they store private contract data on a node. If the node operator cheats, their funds can be slashed. Staking also helps to prevent sybil attacks.

tBTC – bringing BTC to the eth chain

tBTC (whitepaper) is a fully BTC-backed ERC-20 token, which is redeemable for Bitcoin on-demand. tBTC is a trust-minimized sidechain, pegged to the Bitcoin price. It bridges BTC and the protocols built on the Ethereum chain, with a high level of security. tBTC allows users to access their BTC equity, while still maintaining their Bitcoin position. Here’s a Bloomberg article discussing the BTC to ETH bridge.

tBTC is a Bonded Multi-Federated Supply Peg. What does that mean?

Each time a depositor mints a tBTC token, a randomly generated micro-federation is created. A federation is a group of users, who sign for the depositors Bitcoin. They use a multi-sig wallet with distributed private key generation, held across multiple nodes on the Keep Network to hold the depositors Bitcoin. SPV proofs provide the evidence that a user has moved BTC on the ETH chain. Once this proof is given, the federated members take control of the BTC, then mint tBTC onto the ETH chain. The federation is bonded, meaning that federation members must put up collateral, before they take control of the BTC. This ensures that the BTC is safe from theft.

The federated group receives KEEP tokens as a reward, in exchange for controlling the Bitcoin, and minting the tBTC. The cost for depositors to mint tBTC is 50 basis points (0.5%).

Can the Federation Members steal your BTC?

In order for federation members to control BTC, and mint tBTC, they must first stake the native collateral of the host chain (i.e. EOS, ETH, etc). Nodes must be collateralized at 150%. This ensures that members don’t steal the Bitcoin. If a member cheats, their funds will be slashed to provide restitution to the harmed user. This prevents federated members from gaming the system. The collateral also removes the need for a reputation component.

tBTC Lot Sizes

Deposit lot sizes are currently 1 BTC, exactly! If a user wants more than 1 tBTC created, they must create another deposit, which will be assigned to another federation. If a user sends more or less than 1 BTC to the contract, they can LOSE FUNDS! Excess funds are split among the federation signers.

Older Methods of bringing BTC to other chains

Older methods of bringing BTC to other chains, have problems. The idea of sidechains, arose even before Ethereum’s creation. Side-chains like Liquid, use a trusted 15 member multi-sig wallet to hold the Bitcoin. Members are chosen based off of their reputation. The members of the multi-sig wallet run their own chain. This is called a federated peg.

Federated pegs “require trust” to ensure no one will steal funds. There are no repercussions other than the legal system, if one of the federated members steals the funds. This can be particularly difficult if members reside in a different countries.

Problems with Federated Pegs include:

  1. funds can be seized
  2. custodians can steal the funds. It relies on trust.
  3. they are reputation based

How tBTC fixes the problems with Sidechains:

  1. tBTC requires federated members to stake their crypto, which can be seized in case of theft or cheating.
  2. censor, seizure, and hack resistant
  3. micro-federations = less risk to depositor
  4. tBTC is “hard money”, while synthetics artificially inflate the supply.
  5. Its redeemable for Bitcoin

Integrations for tBTC

The Keep Network team focused on integrations from the beginning, with 75% of defi platforms already signaling their support. tBTC is currently integrated with Compound, which is now being tested on the Ropsten testnet. Users can lend their tBTC, to earn interest as ctBTC. 40+ projects such as MakerDAO, Aave, and Uniswap will be rolled out in the weeks after launch.

Conclusion on keep network and tbtc

A privacy layer is a missing piece of the blockchain puzzle, which could birth a host of new applications. Data secrecy is necessary for many businesses to operate. Keep Network provides a solution to some major issues in blockchain, and has the ability to implement them at scale. In addition to privacy, Keeps also offer a degree of interoperability. Cross-chain trading can even be facilitated with Keep’s technology.

Keep and Summa’s first application tBTC, is a bridge between the top two chains. Other solutions like WBTC aren’t sufficient, as they are more centralized and require KYC. Bringing in massive amounts of BTC capital, could propel defi into mainstream use. The space could explode, due to this capital infusion! I like how devs are creating tBTC with decentralization and censorship resistance in mind. Hardcore enthusiasts in this space appreciate it.

There were a couple issues that i have with tBTC. I hope they can be addressed. I felt like the 1 full BTC lot size would be an issue restricting adoption. Since this is an untested technology, requiring a high amount of capital to test it, can be a little scary for new users. Reducing lot sizes would improve usability. This is especially apparent, with recent issues surrounding imBTC.

I also felt like there could be a better solution, when a depositor doesn’t send the correct amount of BTC. If they send more than 1 BTC, the excess funds are split amongst the signers. I feel like a better solution, would be to give the depositor a chance to refund the excess amount with a penalty, which would then be given to the signers.

There are positives and negatives with each BTC backed token. tBTC offers a good solution, and is being built with the core principles of decentralization and censorship resistance in mind. This is one of the main reasons i would choose tBTC, over other types of BTCtoETH solutions.

On a related note, if you are looking for a tokenized BTC solution, you might also check out a project called PieDAO. It is a DAO that holds a basket of BTC-to-ETH tokens. It mints a BTC++ token which represents this basket, to be used in Eth defi. I hope that tBTC will consider integrating with them. I like how it allows users to remain diversified, so if one tokenized BTC solution has problems, it wont affect funds as significantly.

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