Smart Bitcoin RSK-BTC, L-BTC and pBTC — How do they compare?
In Parts I and II of this series, we compare cross-chain composability solutions WBTC, tBTC and sBTC. As we develop and refine the pTokens approach, we continue to analyze how other teams address the challenge of unlocking liquidity and bringing interoperability to blockchains.
Part III will examine RSK-BTC by RSK and LBTC by Liquid network.
You can also start here — learn how our cross-chain composability solution compares to other approaches in Part 1 of our analytical series.
How do they work?
Both the RSK and Liquid networks are sidechains of the Bitcoin blockchain.
Rootstock (RSK) is a smart contract platform that connects to the Bitcoin blockchain through its own sidechain. Bitcoin users can interact with the RSK network by locking up their bitcoins on the Bitcoin blockchain while their corresponding “Smart Bitcoin” (RSK-BTC) moves freely on the RSK side chain.
Their RSK Token Bridge, launched by IOV Labs, extends this functionality to the Ethereum ecosystem so users can “cross” their bitcoin over and interact with Ethereum DApps.
Liquid is also an implementation of a federated sidechain. The Network comprises of a group of trustworthy exchanges, traders, and financial institutions. It acts as a settlement platform for Bitcoin-based trades and exchanges, and the issuance of digital assets. While its core focus is to enable a faster and more private trading experience of bitcoin on exchanges, anyone can issue new assets on Liquid, including stablecoins and security tokens. These can also be traded freely within the network.
pTokens offers a different kind of solution to both of these, with a strong commitment to flexibility and compatibility. Users are able to mint pTokenised bitcoin (pBTC) and use them across a more expansive range of blockchains, such as Ethereum and EOS. Conversely, other cryptocurrencies will become usable on Bitcoin-backed blockchains, such as the RSK and Liquid sidechains.
To achieve this, pTokens also has its own version of a cross-chain connection “bridge” similar to RSK. However, the pTokens system implements multiple bridges to enable connection among a variety of blockchain protocols. Each bridge — where the two separate blockchains meet — aims to be secured by Multi Party Computation, with a Trusted Execution Environment adding an additional security layer (during Phase 0, the system currently operates on TEEs only, MPC will be introduced with a network upgrade. We enable users to deposit one kind of currency, such as BTC, and issue a token that is compatible with another, non-native blockchain, such as Ethereum.
Connections can be unidirectional (for example in the case of Bitcoin and Ethereum) or bidirectional (for example in the case of Ethereum and EOS). Connections for multiple networks are already available on testnet, such as pEOS and pLTC on Ethereum. Each pTokens bridge (for example pEOS on ETH) implements two light clients; one for the native blockchain (EOS) and one for the host blockchain (Ethereum). Merkle proofs are provided to the pTokens bridge to verify that a given deposit (either that of the underlying collateral to be tokenised or, in the inverse process, that of the tokenised asset to be burnt) has happened, and hence the corresponding peg-in or peg-out operation is triggered.
Keeping this cross-chain bridge technically simple allows for improved safety as it makes it easier to audit, and implies a lower risk for architectural flaws. Put simply, in Vitalik’s words, “interoperability can be accomplished with light clients and merkle proofs”.
Peg-in, Peg-out system
To “cross” their tokens from one chain to another, the RSK Bridge locks the original token in its own smart contract. This event triggers the minting of the equivalent amount in ERC777 “side tokens” that can move freely on the RSK or Ethereum networks. This maintains the existing supply of tokens.
In the case of BTC, users lock up their coins in the Bridge to then mint RSK-BTC, which can be used on the Ethereum network. RSK-BTC is linked 1:1 to Bitcoin (1 RSK-BTC = 1BTC).
When users want to redeem their RSK-BTC, these side tokens are burned and their originally deposited BTC is released from the token Bridge smart contract.
As for Liquid, users send their bitcoin to a specific address in control of the Liquid Federation. Users are then credited with L-BTC (pegged 1:1 with BTC) once the transaction has 102 confirmations on the mainchain (for security reasons). This L-BTC is not compatible with other blockchains, and can only be used within the network and partner exchanges. To peg-out (switch their L-BTC back to BTC) users make a transaction in Liquid that instructs the functionaries to pay to their mainchain address.
To participate in the Liquid Network, users must run a full node or have a Liquid wallet, where you can send and receive Liquid assets. A full node grants you the ability to potentially peg-in bitcoin, issue new assets, and fully verify blocks on the sidechain. This stand-alone and federated system, while experiencing slower peg-in/peg-out speeds, aims to be a far more private alternative to Bitcoin transactions.
The pTokens solution uses a similar peg-in/out approach to RSK, whereby users send their bitcoin to a specific address using the custom pTokens DApp or integration partners. pBTC (an ERC777-ERC20 compatible token) is pegged 1:1 with bitcoin and automatically minted and then sent to the user’s Ethereum address of choice. This flexibility applies to all pTokens and protocols, not just Bitcoin and Ethereum — in general user’s will receive their pTokens in the corresponding blockchain wallet of their choice. For example, users will be able to hold pBTC on the EOS network, or they might be able to transact pETH, pUSDC or pEOS on the Liquid network, making use of their confidential transactions.
Users can also redeem their pBTC any time they like, providing the amount they wish to be burnt, and the destination bitcoin wallet address for where to receive them.
While Liquid can bridge bitcoins from the Bitcoin blockchain, and the RSK protocol can currently bridge Ethereum and Bitcoin, pTokens are blockchain agnostic — we will make any cryptocurrency compatible with any protocol, and can even be integrated with the RSK and Liquid networks as well.
Additionally, the pTokens system is not limited by the amount of tokenised assets it can issue. Due to the implementation of the pTokens bridges, the liquidity limitations of the tokenised assets which can be issued is uniquely determined by the availability of the underlying assets themselves.
Trustlessness and governance
RSK is governed by a federation in charge of notifying the events that have happened in its bridge between one chain and the other. Anyone can help manage the federation and join the sidechain by setting up a node — the aim is for it to become more decentralised.
Similarly, anyone can run a full node for Liquid. It is designed to be auditable and transactions are viewable by any network participant. However, unlike the Bitcoin blockchain which is secured by the Proof of Work algorithm, the Liquid network is secured by a Strong Federation of trusted functionaries.
The pTokens system follows a progressive decentralization, security-oriented governance approach, currently in its Phase 0. During Phase 0, the system operates on Trusted Computing, while an upgrade to introduce a Multi-Party Computation-governed network for the pTokens bridges is planned for the future.
In its final version, the system will be implemented as a combination of MPC and multi-Trusted Computing, where MPC is used for a decentralized network of nodes (validators) reaching consensus to power its computations and jointly perform the peg-in and peg-out procedures.
To achieve trustlessness, the pTokens solution uses a multi Trusted Execution Enclaves (TEE) approach for additional security over the system — a heavily encrypted and secure physical piece of hardware where the two blockchains and their private keys are stored. Only this Enclave has access to both sets of keys so it can interoperate and execute transactions on both blockchains.
During its initial stages of development, the pTokens technology has been backed by Provable, its main development team. The system will undergo a series of upgrades to achieve a fully decentralized, permissionless network of validators, the pNetwork, where multiple validators will ensure there is no central point of failure. It will become an open, public and independent network built upon Ethereum with an in-built governance system, pNetwork DAO.
The pNetwork token (PNT) will also be introduced to the system as a way to implement community-lead governance and as an incentive for validators to perform their roles.
Learn about the pTokens mainnet launch.
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While the three solutions all share certain components on a technological level, the pTokens system is heavily focused on flexibility — we want it to be fully “integratable” or compatible with a variety of protocols. This potentially includes both RSK and Liquid networks too. For example, you could create a pTokenised version of ETH on Liquid and be able to leverage confidential transactions to move Ether around. Or even, a pTokenised RSK-BTC (pRSKBTC) on Liquid network. This is what composability is all about.
🦜 Interested in becoming a pNetwork validator? Get in touch.
💡 For a more technical deep dive into pTokens infrastructure, read our technical paper or check out the summary on our website.
🔗 For any blockchain project looking to integrate pTokens into their infrastructure, we have also built a pTokens JS library.
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💬 Connect with us on Twitter and join the conversation in our pNetwork Telegram and Discord.
