Who Holds the Keys in dlcBTC?

In many of our sales meetings we’re asked, "Who holds the keys in dlcBTC?" This question is crucial because it touches on the core of what makes dlcBTC secure and innovative.

Understanding dlcBTC's key model is essential for anyone considering locking their BTC to mint dlcBTC for DeFi participation.

By clearly explaining how our key model works, we will highlight the security, trust, and control that our solution offers.

This article will delve into the specifics of dlcBTC's key model and why it stands out from traditional custodial solutions.

Understanding dlcBTC's Key Management Model

The dlcBTC bridge offers a unique approach to key management by employing a Multi-Party Computation (MPC) model. This method ensures that Bitcoin remains secure and under the control of its rightful owner, even while engaging in complex transactions.

MPC is a cryptographic approach that distributes control over private keys among multiple parties.

In dlcBTC, this model adds an extra layer of security by ensuring that no single party has complete control over the locked Bitcoin.

Instead, multiple parties must collaborate to authorize any transaction, thereby enhancing the security of the assets. Threshold signing is a good example of MPC application by DLC Attestors as discussed below. 

The dlcBTC bridge functions similarly to an MPC wallet by requiring a 2-of-2 multisig setup to sign transactions. This multisig configuration involves two primary components: the Merchant Signature and the DLC Attestor Network Signature.

1. Merchant Signature

dlcBTC merchants have flexibility in managing their Bitcoin assets. They do not need to employ the MPC technology; they can choose to sign transactions with a single key.

However, for those seeking additional security, the 2-of-3 multisig arrangement is an available option. In this setup, the merchant uses three keys:

• Personal Key: Held directly by the merchant, allowing them to maintain personal control over their BTC.

• Custodial Key: Managed by a trusted custodial service, such as Ledger Wallet custodial service, adding an extra layer of security. Other enterprise grade MPC custodial services will be supported in the near future!

• Backup Key: This key is stored in a secure backup location, such as a safe deposit box, and provides a fallback if the primary keys are compromised or inaccessible.

With this model, the merchant must use any two of these three keys to authorize a transaction. This setup balances security and flexibility, making it a robust option for institutional-grade merchants seeking additional protection without requiring MPC technology.

By choosing this approach, merchants can enhance the security of their transactions while retaining the ability to manage their assets according to their needs and preferences.

2. Attestor Network

The DLC Attestor Network is critical in validating and attesting to transactions. This network operates using the Frost MPC protocol, which involves the following steps:

• Distributed Keys: Each DLC Attestor holds their own unique key.

• Threshold Attestation: A threshold number of attestors must agree to achieve consensus and sign a transaction. Specifically, 10 of the 15 attestor keys must be combined to reach a valid attestation.

• Frost MPC Protocol: The Frost protocol ensures that the keys are combined securely and that the attestation process is efficient and tamper-proof.

By requiring 10-of-15 keys for consensus, the DLC Attestor Network ensures the validation process is highly secure and resistant to tampering or collusion.

Benefits of the dlcBTC Multisig Model

dlcBTC's multisig model offers two major benefits:

Enhanced Security

By splitting the keys between the depositor and a decentralized network of attestors, dlcBTC reduces the risk of fraud and seizure.

This decentralized control eliminates single points of failure common in traditional custodial models, making the system more resilient to attacks.

User-Controlled Fund Access

Funds in dlcBTC can only exit the self-custody vault by being returned to the depositor's address, and this transaction requires the depositor's key to authorize it.

This ensures that only the rightful owner can move the Bitcoin, providing an additional layer of security and ensuring that the depositor retains complete control over their assets.

Comparison with Traditional Custodial Solutions

Traditional custodial solutions often involve centralized control, posing several risks:

Vulnerability to Hacks and Seizure

Centralized custodians can become single points of failure, making them attractive targets for hackers.

Besides, centralized custody can be susceptible to government seizures, compromising the security of the assets.

Trust Issues

Users must place significant trust in the custodial entities, relying on their security measures and operational integrity. Any failure or breach can lead to substantial losses.

In contrast, the dlcBTC key model empowers users with self-custody while leveraging decentralized attestation for additional security.

The hybrid approach minimizes the risks associated with central points of failure and enhances overall asset protection.

Generally, the dlcBTC Bridge's implementation of the MPC model represents a cutting-edge approach to key management.

By leveraging both merchant-controlled and decentralized attestor signatures, dlcBTC ensures that assets remain secure, accessible, and under the rightful owner's control.

This innovative solution offers a new level of trust and reliability for those engaging in Bitcoin transactions, making it a compelling choice for merchants and investors alike.

Merchants should consider dlcBTC for their Bitcoin transactions to take advantage of its security features and flexibility.

About dlcBTC

As a decentralized wrapped Bitcoin, dlcBTC leverages Discreet Log Contracts (DLCs) and Chainlink's Cross-Chain Interoperability Protocol (CCIP) to provide a theft-proof bridge to cross-chain DeFi, backed by the security of the Bitcoin network. dlcBTC unlocks yield for your Bitcoin in DeFi with the benefit of lower fees and merchant self-custody, empowering users to put their Bitcoin to work.

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