Threshold Network aims to tackle privacy issues for decentralized systems that the blockchain technology was meant to overcome for pre-existing Web2 systems. A bitcoin bridging token (tBTC) is the network’s flagship offering for privacy-enhanced cross-bridge transfer of BTC. It offers primitive cryptographic tools that are compatible with the decentralized projects of Web 3. It also runs a privacy stablecoin, USD, and a native utility token, T.
The threshold ecosystem is developed to make decentralized applications and many other Web3 services hack-proof and completely free from data surveillance, a notorious problem faced with Web2 applications. The company emerged from the merging of services by the Keep network and the NuCypher platform. The two companies merged their protocols to come up with a new protocol– Threshold Access Control.
The Keep network is made to secure off-chain transactions and private data that involves transfers off the chain. NuCypher provides end-to-end encryption for on-chain data involved in highly secret transactions. The Threshold Access Protocol combines Keep’s off-chain security containers with NuCypher’s encryption tools for on-chain dynamic access control.
The network is secured by a proof-of-stake consensus mechanism combined with a Byzantine Fault Tolerance algorithm to prevent single-point network failures. The entire ecosystem consists of two main components— the Threshold Access Control protocol and tBTC, a Bitcoin-to-Ethereum token bridge.
Threshold provides for a very secure and private platform as the node network adopted is highly decentralized and independent of information leaks to other nodes. The cryptographic operations are split into separate units that are assigned to different nodes, thereby increasing security and enabling a trustless network.
The network governance and maintenance are very community-driven by the Threshold DAO (Decentralized Autonomous Organization). It includes constituents from both the Keep and NuCypher platforms.
The threshold access control protocol enables end-to-end encryption security for transactions, data sharing, and communication without the need for a centralized authority. It is achieved with the help of Threshold’s suite of primitive cryptographic building blocks for privacy, security, and access controls. The service is built using two technologies- Proxy Re-Encryption (PRE) and condition-based Decryption.
It gives the users a provision where they can set certain conditions for anyone wanting to gain access to that data. The data will only be revealed to a third party if those conditions are fulfilled; if not, the information cannot be read by them.
The decryption is also done by distributing the keys among multiple nodes that share various parts of them. A minimum number of those nodes (threshold) must be active at the time of the decryption request for the decryption to happen. It is then verified for condition fulfillment before finally updating the access authorization.
It is a more scalable and flexible form of public key encryption that ensures end-to-end encryption of the data transferred for transactions and communication. It is the most prominent cryptographic tool on the platform that provides end-to-end encryption-as-a-service.
In this technique, data is transferred from one public key to another using proxy entities, which are the network’s nodes. These nodes don’t have access to the private keys or the power to decrypt the data. They re-encrypt the encrypted data received from the previous proxy and then pass it on to the next proxy. A set minimum number of proxies is required to transfer certain data. They all use the threshold cryptography method for encryption.
tBTC bitcoin bridge provides a cross-chain secure and private Bitcoin transfer to the Ethereum chain. Existing solutions that enable the bridging of tokens are less decentralized as they require users to entrust a third party that issues an ERC-20 token equivalent of the given BTC. They only act as an intermediary service provider but have complete access to the transaction data.
tBTC second generation or tBTC v2, provides a truly decentralized as well as scalable solution for cross-chain transactions between BTC and ETH. For this, the network uses a randomly selected group of nodes to secure the deposited BTC into a threshold cryptographic encrypted token (tBTC). The further transfer of this token will only be initiated if a set minimum number of nodes agree in the majority to validate the transaction.
The random selection of the nodes changes every week and is done based on mathematical formulas. Hence, it is a trustless, permissionless system that relies on mathematics rather than a central authority.
Thus far, 768.41 tBTC have been minted in 213 separate mints, which are held by 166 unique addresses. The total value locked (TVL) by them is 23,349,530 USD.
The Keep protocol and NuCypher protocol merged to develop the T-protocol, which is the T-token that was released on January 1, 2022. The T-token holders get to be a part of the Threshold DAO and can participate in the governance of the network. The token can also be used for staking to run a node and to provide liquidity for the staked assets, both of which help earn yields. It can also be traded on the secondary market.
Notably, the nodes of the network also earn fees in the native utility token T, from various decentralized applications that rely on Threshold’s cryptographic primitives- tBTC, PRE, and CBD- which are all facilitated by the different nodes of the network.
At the time of writing the article, the current price of T is $0.021615, which is a decrease of 1.36% over the past 24 hours. The current 24-hour trading volume is $15,304,146. With a circulating supply of 8,800,386,214 T, the current market cap is $190,218,302. The token has a hard cap of 10,000,000,000 T.
One of the most ambitious projects on the network is Threshold’s stablecoin, USD. It is soft-pegged against the USD and backed by ETH and tBTC as collateral. The platform is also developing a B-protocol (Bootstrapping protocol) to increase the adoption of thUSD and provide effective liquidity on the network against T, tBTC, and thUSD.
The network also conducts a Bug Bounty Program to make itself more secure against possible loopholes, leaving it vulnerable to attacks. There are also other proposals in line to improve the existing security protocols and the different tokens, including thUSD, and empower the Threshold DAO by enabling rewards through Coverage pools, etc.
The cross-chain utility of Bitcoin is increasing with time as more and more dApps emerge on other blockchains. Centralized control of token bridges is against what Bitcoin was aimed for. A secure, decentralized solution like tBTC is a bright way to enable cross-chain operations. The company aims to enhance privacy and hamper data monitoring by centralized powers like states and corporate conglomerates, the consequences of which have been globally devastating, as evident from time to time.
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