What’s in Store for Keep in 2021

Last year, Keep delivered Ethereum’s first decentralized Bitcoin peg. This year, we’ll not only scale the protocol on Ethereum, but we will also challenge centralized pegs on other chains. DeFi deserves the world’s most liquid digital asset (Bitcoin) and a fully decentralized way to access it. Below I outline the highlights of our 2021 roadmap: community governance, scaling with a new “money lego” (coverage pools), scaling via our v2 protocol, and adoption across new chains.

The next phase of decentralization — community governance

Governance will be a major focus of Keep’s development over the coming months. Over time, we intend to transition all responsibilities and control of the network to the community, moving toward a full-fledged DAO. As the network evolves toward its multi-chain future, the role and importance of community governance will continue to increase.

Announcing the community multi-sig

The Keep community recently voted to elect our first community multi-sig. 8 long-time community members were chosen as signers by the community. All have been heavily involved with Keep and tBTC for months, contributing ideas, network proposals, and code, and all have been vetted by the dev team.

This is a huge milestone for the Keep network. The network already has its own form of decentralized governance today — any changes proposed by the dev team are “ratified” by users and stakers through authorization. But the dev team still holds a few distinct governance rights over tBTC and the random beacon, as well as control over funding staking and liquidity rewards. The multi-sig is another step toward removing any vestiges of centralized control ー which can become single points of failure ー and empowering the community through fully decentralized governance.

The community multi-sig will be immediately responsible for governing tBTC v1, including:

• adjusting the collateral requirements and liquidation thresholds for new deposits.
• adjusting the signing fees stakers earn per new deposit.
• adjusting the allowed lot sizes for new deposits.
• adding a backup price-feed in case of any issues with the ETHBTC feed provided by MakerDAO.
• pausing the system to new deposits in case of an emergency, a governance ability set to expire in a few months.

Moving toward a DAO

In the future, the dev team intends to surrender the ability to allocate weekly liquidity and staking rewards, placing the ability to balance incentives and directly broker partnerships with other projects directly in the hands of the community.

Already, community members have put forward proposals to feature KEEP and TBTC on Aave, Cream, and Sushiswap. Community governance means they’ll also be able to offer incentives to partnered projects.

As these efforts grow in scope and value, the multi-sig alone won’t be enough to capture and enforce community sentiment. For this reason, community multi-sig members have already built staker signaling to help inform their governance decisions. As we experiment further with signaling and measure engagement, we’ll formalize on-chain governance, empowering stakeholders to execute formal proposals, manage liquidity rewards, balance fees, offer developer grants, and ratify future protocol upgrades.

Solving economic scalability

tBTC v1 has seen tremendous growth and traction since its release. From the time the project launched in September, a fully decentralized custodial network has held all BTC in the tBTC bridge, enabling its use across Ethereum without sacrificing censorship resistance. TVL has grown to an all-time high of $250M in assets locked in the system. This momentum has challenged stakers to provide enough ETH to match the growing demand for TBTC. Most importantly, tBTC has proven to be the first robust, decentralized Bitcoin peg on Ethereum.

Upgrades without upgrades — tBTC “v1.5”

The v1 release hasn’t been without challenges. Starting decentralized is playing on the “hard” setting. Client issues are harder to debug, and node operation requires a high bar of technical and financial sophistication. Today, there are 180 stakers operating the network on Ethereum’s mainnet, locking 11.7% of the total KEEP supply; this year, we’ll grow that number to 1,000.

To achieve 1,000 stakers, we need to address the issues they’ve encountered over the past 4 months:

1. Managing ETHBTC volatility
2. Maintaining enough TBTC on hand to close deposits
3. Monitoring on-chain events relevant to backed deposits

Already, community governance is in the process of adjusting liquidation thresholds based on market data, and the community has tackled monitoring head-on with a suite of tools. But we can do more.

In the following weeks, the team will introduce a new money lego to act as a backstop to the tBTC peg ー coverage pools. Coverage pools act as a buyer of last resort, insuring against the loss of the tBTC v1 peg. An effective backstop will allow community governance to optimize collateral requirements, lowering liquidation thresholds to as low as 100%.

Applied to v1, coverage pools make stakers’ jobs easier. They will lower the effective liquidation penalty, address volatility, require less collateral to operate the peg, and allow easy passive participation by underwriters in KEEP rewards ー without requiring a contract upgrade.

But coverage pools’ next application will do far more.

tBTC v2

tBTC v1 is an immutable codebase. The dev team can’t upgrade it, and the community only has a short list of parameters by which to govern, none of which can force a system shutdown or upgrade. tBTC v1 will continue to run as long as depositor demand and fees justify stakers’ time and capital.

Now that v1’s design is proven, and community governance can take over economic management, the team can explore different trade-offs in system design.

The next release of tBTC will

• only require stakers to put down KEEP.
• approach optimal capital efficiency, requiring 1%-10% in additional collateral, versus the additional 150% required in v1.
• significantly simplify staking operation.
• lower the total cost of operation for depositors and stakers, as well as improve the UX of the bridge.
• remove the need for price oracles.

Over the next few months, we’ll share more details on the tBTC v2 design. Unlike the tBTC v1 development process, which had the explicit goal of shipping an immutable codebase, v2 will be built iteratively in collaboration with community governance, including contract upgrades where appropriate.

The v2 upgrade will remove all scalability bottlenecks, meaning tBTC can compete directly with WBTC, Liquid, and other centralized alternatives.

Keep’s multi-chain future

Finally, 2021 will mark the launch of Keep’s next chain, Celo. KEEP stakers will be able to earn in new ways by serving Celo users using the same tools, bringing privacy infrastructure to the chain and BTC to Celo’s reserve-backed cUSD.

After Keep’s launch on Celo, we’ll announce two additional partnerships. As each new chain launches, additional users and their capital will gain access to Keep, tBTC, and most importantly: true DeFi for Bitcoin.

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