The zkSync Torch of tBTC and the cooperation between tBTC and Celo have been a lot of news on the Internet in the past two days. Let’s briefly review the importance of tBTC and its possible significance to the future development of cryptocurrencies.

tBTC

Building a trustless, intermediary-free bridge between Bitcoin and Ethereum was considered a fantasy for quite some time, until tBTC finally launched on mainnet, which made it possible to directly create It is now possible to mint tBTC in a trustless manner.

coupling effect

In physics, there is a phenomenon known as the coupling effect. This phenomenon occurs when two systems start to interact closely with each other.

Due to coupling effects, new changes are often seen that were not possible in either system before. In some cases, the result of coupling is a complete transfer of energy or value from one system to another.

As the first trust-minimized bridge between Bitcoin and Ethereum, tBTC can be used as a coupling medium between these two public chains. While it's impossible to predict exactly how this will play out, here are a few directional speculations:

How will tBTC affect Ethereum?

tBTC is not the first synthetic BTC on Ethereum, but it is the first with strong decentralization guarantees. Anyone can mint tBTC with collateral and can become a signer to maintain and secure the connection between Bitcoin and Ethereum. These guarantees can potentially encourage more BTC holders to sell their BTC holdings by minting tBTC and using it to generate income in DeFi."put in"to work.

Previously, the collateral used in DeFi was primarily ETH, as other ERC-20 tokens or centrally issued stablecoins had much smaller caps than ETH. This in turn creates fundamental constraints on the growth of DeFi, as the amount of collateral that can be used is limited.

If tBTC succeeds in bringing a large amount of BTC liquidity into DeFi, DeFi may grow significantly, because the current market capitalization of Bitcoin is 8 times that of Ethereum. Hopefully this change will be reflected in the price of ETH by then. ETH price is one of the most important parameters for Ethereum and DeFi security.

risk

risk

However, these benefits are not without risks. One of the possible long-term risks (though unlikely, discussed below) is that BTC could replace ETH as the primary collateral for DeFi protocols. In this case, ETH may slowly start to lose value, and the Ethereum network will simply become a sidechain of Bitcoin.

This could eventually lead to all the value currently stored in ETH flowing back to BTC along with DeFi protocols that can run on both BTC-dominated sidechains and the Lightning Network. This scenario is less likely due to the economic design of tBTC and the role ETH plays in the security of DeFi and the entire Ethereum network.

How will tBTC affect Bitcoin?

For the Bitcoin network, tBTC is generally positive. So far, BTC has demonstrated strong properties as a store of value and a medium for large payments. However, the properties of BTC as a financial asset, such as collateral for a loan, depend largely on the centralized entity that acts as a bank for BTC. This doesn't necessarily fit the philosophy of Bitcoin. tBTC may generally enhance BTC's ability to function as a financial asset, increasing BTC's utility, and perhaps value.

The only major risk to Bitcoin is whether tBTC pushes too many Bitcoins onto the Ethereum network. This would cost Bitcoin a significant portion of settlement fees, which could ultimately weaken the security of the network. It is worth mentioning that this risk is not unique to tBTC, but exists in every Bitcoin off-chain scaling solution, including the Lightning Network and sidechains.

It's too early to know exactly which of these scenarios will play out. Nonetheless, tBTC is likely to play an important role in the cryptocurrency ecosystem. In the future, we expect to see more competing projects attempt to establish a two-way connection between Bitcoin and Ethereum, rather than the current tBTC one-way connection.