How iBTC Works
From BTC to DeFi in Four Secure Steps
iBTC’s protocol seamlessly converts Bitcoin into a DeFi-ready asset without bridges or custodians. Here’s the process, leveraging Bitcoin Layer 1 security and Ethereum smart contracts:
Lock BTC
Action: Merchants deposit BTC into a 2-of-2 multisig vault on Bitcoin Layer 1.
Security: The vault requires signatures from both the merchant (KYB-verified) and the Attestor Network, preventing unilateral control.
Attestation & Confirmation
Action: The Attestor Network, a decentralized group of node operators, monitors the Bitcoin blockchain to confirm the deposit.
Validation: Attestors use FROST (Flexible Round-Optimized Schnorr Threshold Signatures) to co-sign the deposit, requiring a quorum (e.g., 10-of-15 attestors).
Efficiency: FROST reduces signature size (~100 bytes vs. 500+ bytes in traditional multisig), lowering transaction costs.
Mint iBTC on the Selected Chain
Action: Once confirmed, the Attestor Network triggers the AttestorManager smart contract (Ethereum, Arbitrum, etc.) to mint iBTC on the target chain.
Ratio: 1 BTC = 1 iBTC, ensuring a 1:1 peg.
Supported Chains: Ethereum, Arbitrum, Optimism, Base, XRPL.
Contract: AttestorManager handles minting events, ensuring no over-minting (audited regularly, DOC6 PAGE7).
Redeem BTC
Action: Users burn iBTC via their merchant or qualified custodian (QC), triggering a redemption event.
Validation: Attestors confirm the burn, co-sign a PSBT (Partially Signed Bitcoin Transaction), and release BTC from the vault.
Speed: Redemption completes in 30-60 minutes, compared to 3-12 hours for traditional wrapped BTC (DOC6 PAGE15).
Technical Notes
PSBT Usage: PSBTs enable secure, self-wrapped minting by allowing partial signing without exposing private keys.
Smart Contract: AttestorManager (Ethereum) manages lifecycle events (creation, funding, minting, redemption), with health monitoring to ensure operational integrity.
Risk Mitigation: Chainlink PoR verifies BTC reserves before minting, preventing manipulation.
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