tzBTC - native Tezos wrap for Bitcoin

tzBTC is a tezos wrap for Bitcoin assets. It allows users and applications on Tezos to directly transact in BTC on the Tezos blockchain, bringing BTC’s liquidity and brand to the Tezos ecosystem and enabling novel financial use-cases on-chain

One tzBTC represents one BTC (so tzBTC is Bitcoin on Tezos), the parity that a group of Keyholders and an independent third-party auditor ensures. In short, the value of tzBTC aims to represent the value of BTC.

The Association is an independent third party that monitors the tzBTC issuance process and publishes quarterly audit reports to confirm that the amount of BTC in custody by Keyholders equals the amount of tzBTC in circulation. The Association supervises Keyholder meetings to manage the supply of tzBTC (mint and burn) and to determine the fees for conducting such actions. The Association also mediates any dispute arising concerning the interpretation, performance, or termination of the Keyholder Agreement before engaging a conflict in court.

Keyholders are responsible for the custody of BTC, the minting of the corresponding tzBTC, and the burning of tzBTC when BTC is redeemed. As the custodians of the BTC corresponding to the tzBTC in circulation, Keyholders may have legal and regulatory requirements that may differ between countries. Keyholders securely custody BTC using a multi-signature (“multi-sig”) setup. A multi-sig setup is also implemented for the minting and burning of tzBTC. Gatekeepers act as financial intermediaries and often serve business-to-consumer (“B2C”) markets, which requires them to be compliant with know-your-customer (KYC), anti-money laundering (AML), and other regulations.

Gatekeepers may accept BTC and allocate the corresponding tzBTC (minted by Keyholders) for Users after performing identity verification checks. Gatekeepers have individual bilateral contracts with Keyholders, and a template for such a contract is available here.

Users buy, sell, and hold tzBTC. tzBTC is acquired from Gatekeepers when Users and Gatekeepers enter into agreements. Users can freely transact tzBTC via FA1.2-supported wallets, and transactions may be publicly viewed via FA1.2-supported block explorers. A list of supported wallets and block explorers is available at https://tzbtc.io.

Three processes are involved in the tzBTC system: Initiating, Minting and Burning.

Initiating refers to the process whereby a User requests to acquire tzBTC from a Gatekeeper. Following a successful identity verification check performed by a Gatekeeper, that Gatekeeper will accept a User’s payment (typically in BTC) and issue a new tzBTC to its designated address (after Minting).

Minting refers to the process of creating a new tzBTC, which corresponds to the BTC held in custody. Minting cannot be executed by a single Keyholder (requires multiple Keyholder signatures) and happens in response to demand from Gatekeepers. In addition to a regular (quarterly) minting process, a User may pay a higher fee to execute an ad-hoc minting process. Minting new tzBTC increases the amount of tzBTC in circulation.

Burning refers to the process of redeeming tzBTC for BTC. Only Gatekeepers may initiate the process of burning tzBTC. By doing so, the amount in question is deducted from a Gatekeeper’s tzBTC balance, and the corresponding BTC is returned to a User. Burning tzBTC decreases the amount of tzBTC in circulation.