“tBTC lasted on mainnet two days.” That’s right, the Ethereum-based token tBTC which was backed 1:1 by bitcoin has been paused just two days after its public launch.
A sidechain, tBTC allows to move BTC in and out of Ethereum without a trusted counterparty. As the project lead Matt Luongo explained, “think cool dApps and new privacy tools for BTC.”
Luongo shared the news via Twitter earlier today that they have pulled the stop and are not helping the users with their funds.
tBTC lasted on mainnet two days. Alas, it was born before it's time.
Goodnight, sweet prince🌹
We've pulled the red lever, pausing deposits for the next 10 days, and are helping users drain funds. We'll publish a full post-mortem when confirmed… and we will rise again.
— Matt Luongo (@mhluongo) May 18, 2020
But the team lead was “glad” that they caught it this early as it means the depositors’ funds are saved. The smart contract bug was found by Antonino Salazar Cardozo, Thesis’ head of engineering and confirmed by James Prestwich of Summa. “It's not so bad. Finding things early means protecting users,” said Luongo.
As for what happened, the team will be posting a deep post-mortem once everything is cleaned up but in short, “Smart contracts are very hard.”
They have taken down the dapp and are now helping users recover funds in Discord. From a maximum of 11 BTC, 7 are pegged in, shared Luongo. Those holding tBTC are asked to visit here.
On May 16, Luongo was the “proud” first tBTC minter on mainnet. Because the system is young and most of the minters were active community members, they are expecting to get this all sorted out in a couple of days only.
“All depositor funds are safe now- but they might not be if they aren't withdrawn within the 10-day new deposit pause,” warned Luongo.
An ambitious attempt failed
The idea with tBTC was to bring BTC over to ETH network via decentralized custodians.
Keep Network, an Ethereum-based system for storing data off-chain and Summa that provides tools for cross-chain communication are the team behind this project.
Unlike BitGo’s Wrapped BTC (WBTC), tBTC took a unique approach to bring a decentralized version of pegged BTC to Ethereum’s DeFi. As we reported, its launch also saw double the amount of BTC locked in DeFi last week while the amount of Ether locked in DeFi continues to drop since February.
With tBTC, it was possible to mint tBTC directly on the Ethereum blockchain in a trustless manner and use their held BTC to generate yield in DeFi.
If tBTC had succeeded “in bringing significant BTC liquidity into DeFi, DeFi could grow significantly” given bitcoin’s market cap, noted Token Daily. It had hoped to reflect in Ether’s price and benefitted in the form of having its interoperability capabilities enforced with other chains.
But it would have also threatened to replace ETH as the main collateral for DeFi protocols.
But now that tBTC isn’t running anymore, its advantages and risks are all fruitless, for now.