Who Keeps the Keys in dlcBTC?

dlcBTC employs a dual-key custody model, where the depositor holds one key and a threshold of attestors holds the other, significantly reducing the risks of fraud and seizure by eliminating single points of failure.
The dlcBTC key-custody model ensures all transactions are observable on the blockchain with clear audit trails, enhancing user trust and transparency.
Merchants using dlcBTC benefit from self-custody and decentralized attestation, while those using MPC custodians enjoy distributed key management, ensuring high security and control over their Bitcoin assets.

In most of our sales meetings, we are often asked, "Who keeps the keys in dlcBTC?" This question is crucial because it touches on the core of what makes dlcBTC secure and innovative. Understanding key custody is essential for anyone considering dlcBTC for their Bitcoin transactions. By clearly explaining how key custody works in dlcBTC, we can highlight the security, trust, and control that our solution offers.

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

The dlcBTC model assigns key custody between two parties to enhance security and trust. The depositor, often a merchant, holds one key, giving them control over their Bitcoin. The second key is held by a threshold of attestors operating in "read-only mode."

This means that while attestors can verify and attest to transactions, they cannot move the Bitcoin themselves. The dual-key system ensures that the depositor retains primary control while introducing an additional layer of security through decentralized verification.

The dual-key custody model of dlcBTC offers several significant benefits:

Enhanced Security: By splitting the keys between the depositor and a decentralized group 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.
Transparency and Trust: The process of locking Bitcoin into a UTXO (Unspent Transaction Output) with cryptographic proofs is transparent and observable on the blockchain. This provides clear audit trails and enhances user trust, as all transactions are verifiable and tamper-proof.

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

Centralized custodians can become single points of failure, making them attractive targets for hackers. Additionally, centralized custody can be susceptible to government seizures, compromising the security of the assets.

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 model empowers users with self-custody while leveraging decentralized attestation for additional security. This hybrid approach minimizes the risks associated with central points of failure and enhances overall asset protection.

For merchants, the MPC (Multi-Party Computation) custodian model offers an additional layer of security. In an MPC setting, the merchant keeps their BTC in self-custody, but the keys are distributed among multiple parties. This setup ensures that no single party can move the Bitcoin without the consensus of others, significantly enhancing security.

Bitcoin's security is enhanced by distributing keys among multiple parties. Even if one key is compromised, the Bitcoin remains secure as the other keys are required to authorize transactions.

Despite the distributed nature of the keys, control over the Bitcoin remains with the merchant. This self-custody approach ensures merchants can access and use their funds without relying on a single custodial entity.

dlcBTC provides practical solutions for merchants looking to engage in DeFi activities while maintaining control over their Bitcoin. Here are a few use cases:

dlcBTC holders can participate in native BTC staking on the Nektar Platform and earn staking rewards. By funding the Enzyme staking vault with dlcBTC, holders contribute to the security and functionality of the Ethereum network, receiving rewards in return.

Users can deposit their dlcBTC tokens into a pool on Aave or Native Lend, decentralized lending platforms. By doing so, they earn lending rewards, providing a steady return on their assets. This option is ideal for users looking to earn interest on their dlcBTC without actively trading.

Learn about dlcBTC lending on Native

As a dlcBTC holder, you can provide liquidity on Swaap Earn's DeFi primitives. By contributing to liquidity pools, dlcBTC holders earn yield from transaction fees and other platform incentives. This generates income and enhances the liquidity of the dlcBTC market.

Explore Swaap Earn liquidity opportunities.

The dlcBTC key custody model offers a robust solution for merchants looking to engage in Bitcoin transactions while maintaining security and control. By distributing keys between the merchant and a threshold of attestors, dlcBTC reduces risks and enhances transparency. For merchants using an MPC custodian, the benefits of distributed key management and self-custody further strengthen security.

Merchants should consider dlcBTC for their Bitcoin transactions to take advantage of its security features and flexibility. For more information, visit our website or contact our sales team to learn how dlcBTC can benefit your business.