ERC-20 tokens, BTC-on Ethereum, similarities and differences between wBTC and tBTC tokens
Let’s take a look at the mechanics of tokens work one by one and draw conclusions:
How does WBTC work?
To get the WBTC, a user requests tokens from a vendor. Then the seller performs the necessary KYC / AML procedures and checks the user’s identity. As soon as this is completed, the user and the seller perform their exchange, bitcoins from the user are passed to the seller, and WBTC from the seller is passed to the user.
refers to the process of creating new wBtc tokens. Minting in the wrapped framework is initiated by the seller and performed by the custodian.
Burning — is an action to exchange bitcoins for WBTC tokens, and it can be done only by addresses of traders. The amount to be “burned” is deducted from the seller’s WBTC balance (in the chain), and then the WBTC offer is reduced.
How does TBTC work?
TBTC is a decentralized and trust-free system proposed by Keep Project and Cross-Chain Working Group. The goal of the TBTC is to create a trust-free system for use by Bitcoin in Ethereum based systems.
tBtc in simple words — it is an Erc-20 token which is provided with bitcoin, keep network will allow to use bitcoin on ethereum blockchain and will have a significant impact on decentralized finance.
Let us consider the process of token creation:
1- A user who wants to exchange his bitcoin for a tbtc token sends a transaction to a tbtc contract to prevent spam attacks, he sends a small amount of air that will be returned at the end of the exchange.
2- A randomly selected group of network validators creates a Multisig wallet and a smart contract returns its address to the user.
3- The user sends the bitcoins to the received address and sends the transaction confirmation to the smart contract tbtc.
4- After the validators have confirmed the receipt of bitcoins, the smart contract creates a tbtc token and sends it to the user to make sure that the validators who created the Multisig wallet will not steal the user’s Bitcoin, they will freeze the airtime as a guarantee. In order to exchange tbtc back for a bitcoin, you need to send your existing tbtc token to a smart contract and specify the address to get the bitcoin.
An important point is that in order to create tbtc you do not need to go through the KYC verification process, the validators creating the Multisig-wallet are randomly selected unidentified persons, which means that no law enforcement agencies can affect them. They also don’t need to deceive you because if they do, they will lose all their locked ether and KEEP tokens.
Below is an overview of the rallying and recording process for TBTC
We considered the similarities and differences between tBTC and WBTC. WBTC is a centralized solution, which is mandatory for those involved in creating the WBTC. tBTC provides greater decentralization, which is most important for the crypto community. tBTC is more secure and economically secure, which is essential in an unstable cryptographic market.