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:

Minting iBTC from BTC

  1. Create Vault on Destination Chain to hold the data for this account's iBTC management.

  2. Lock BTC

    • Action: KYB'd 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.

  3. 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.

  4. 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).

Redeeming BTC from iBTC

  1. Burn iBTC

    • Action: Users burn iBTC via their merchant or qualified custodian (QC), triggering a redemption event.

  2. User Requests BTC Redemption

    • Action: User Requests BTC Redemption via the dApp

    • 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.

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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