The Keep mainnet launched on May 4, 2020, and the tBTC launch is imminent. On Apr 24, 2020, Matt, Carolyn, and Sloan joined us to answer all questions Keep and tBTC, and to discuss the role of staking in the network.
- mainnet has launched
fixed token supply with an initial staking subsidy
- staking early is key to maximizing rewards
- 100k KEEP minimum, 60 day lockup
- off-chain, opt-in governance
- interoperability will bring tBTC to Cosmos, Polkadot, and other ecosystems
The Keep team’s mission is to provide a bridge between the world of public blockchains and private data in order to enable a new wave of ground-up innovation for blockchain developers.
The Keep network provides a source of randomness and small amounts of private storage for blockchain applications using “keeps.” The Keep network uses “keeps” to provide two primary things: a source of randomness and small amounts of private storage for blockchain applications. Why these two things?
Keep = Private Storage + Verifiable Randomness
Open participation, while being at the heart of blockchain technology, can leave a network vulnerable to being co-opted by a false majority. To participate in Keep, you need to own part of the network (KEEP tokens) and your participation is assigned randomly. A limited token supply and a “random beacon” (the source of randomness), enables Keep to mitigate Sybil attacks, making it difficult for one entity to pretend to be many entities to take control of the network. Having to invest in KEEP tokens and the unpredictability of participation makes it hard to co-ordinate efforts to co-opt Keep’s network.
Combining this randomness with encrypted storage takes things one step further. Participants can securely hold pieces of encrypted information that control vast amounts of assets. How? The participants that hold this private information cannot decode it, because a lone piece of encrypted information is useless to its holder (called a Signer). A group of Signers cannot coordinate to reassemble the pieces–only the system can co-ordinate to do that.
How could Keep be used? By any application that depends upon a verifiable source of randomness. For example, a lottery application needs to pick a winner and prove to participants that that selection process wasn’t biased in some predictable way and also that it didn’t involve human intervention that favoured a particular winner. A “mixer” application pools uses a random selection process to help ensure the source of funds remains private. Each will want to prove that their selection process was entirely random, and Keep’s Random Beacon can provide this service for a fee.
We can expect to see more Keep applications. Skip ahead to the future of Keep here.
tBTC: moving BTC value into Ethereum DeFi
Perhaps the most anticipated use-case is tBTC, a Keep application that the Keep team (Thesis) is launching. Using the Random Beacon and encrypted storage, tBTC can securely hold a Bitcoin private key. Why is that important?
tBTC is set to bridge the value of BTC into Ethereum’s DeFi ecosystem with strong security guarantees. tBTC will enable the creation of Ethereum-based BTC, and each of these tokens will be redeemable for real BTC in an automatic and trust-minimalized environment.
tBTC can be used to do two things:
1) Keep Bitcoin held in reserve at an address on the Bitcoin network, and then mint redeemable, ERC-20 Bitcoin vouchers called tBTC on the Ethereum network.
2) Send Bitcoin on the Bitcoin network to an address specified by the entity that has redeemed tBTC tokens using the Ethereum network.
All of this is done in a trust-minimalized way, which means that you will be able to use tBTC as a way of using actual Bitcoin in the Ethereum DeFi ecosystem without needing to trust a particular entity or without needing permission to participate. When you want your Bitcoin back, you can exit the system without trust or permission.
This is very different from wBTC, which Carolyn informed us is custodied by BitGo and Liquid, a small federation of exchanges. With Keep you trust that the operators will not be able to collude, and these guarantees come from value put at stake to participate as an operator and the ETH deposits that overcollaterize the tBTC being minted.
June 8 is scheduled to be the stakedrop—check that out here.
The KEEP supply is a fixed amount of one billion tokens. Two percent of the supply (20M KEEP) will be awarded to KEEP stakers as an initial subsidy, and 18% (180M KEEP) will be awarded to ETH bonders in tBTC. Keep has a long list of backers, but we don’t yet know who will initially own what proportions of the network.
The KEEP token will be a work token, meaning that it will entitle its stakers to fees earned by the network for the work that the network performs, whether that’s for providing a source of randomness or any other number of Keep applications like tBTC.
It’s important to note that the Keep token supply will be fixed, and after 20% of the supply is disbursed as a staking subsidy, stakers will earn fees paid only in ETH and tBTC (and whatever other tokens created by Keep applications). KEEP tokens won’t be used to pay fees. The more you stake, the more work your node will get, and the more fees you will earn.
If you stake KEEP, you’ll also earn fees in ETH for each completed transaction. The fee amount will cover the gas costs plus an additional fee, estimated to be in the $10-50 USD range. The sooner you begin staking the better, since you will a larger portion of the subsidized KEEP rewards.
You can either run your own node or delegate to a staking provider–check out our KEEP staking delegation guide here. Delegations take effect after 12 hours, after which they require 60 days to undelegate. New delegations require a minimum of 100,000 KEEP tokens in order to participate, and this minimum will decrease to 10,000 KEEP over the next two years.
If you bond ETH, at network maturity you will earn your portion of the sum of fees for all the deposits you back, which is 50 basis points (bps) per 6 months (1% per year). While that may seem low, Matt explained that the fee volume increases as the value of the assets move back and forth from the Bitcoin network and the Ethereum network, and that’s because deposits generate the fees.
For example, if you have 1 BTC under management, you could have 5 BTC move in and out of Ethereum, which will yield 3.5% of your deposit.
What are the risks involved in staking KEEP?
Any changes to a delegation will require a 60 day undelegation, whether that’s increasing/decreasing the size of the delegation or redelegating. It will be important to get the delegation right initially, or to have enough KEEP to create an additional new node, since stakers won’t earn anything during the 60-day unbonding period.
According to Matt, “the risks are surprisingly low. ‘Don’t get hacked’ and keep your machine on are the big ones.” The biggest risks come from intentional, malicious behaviour. If your operator’s node attacks the Keep Network, the network will slash or seize the delegated funds. While the Keep team has had their code audited by two of the best independent auditors, this is a new network, and it may behave in unexpected ways that result in slashed or seized funds.
To help mitigate these risks, the Keep team has had the tBTC contract independently audited by two of the best in the biz: ConsenSys Diligence and Trail of Bits.
Problems with Ethereum Gas Fees
Ethereum gas prices can be volatile, which means that network congestion and gas costs for transactions could disrupt Keep network operations and/or make it expensive for users. However, the team has invested in making the Keep network resilient to gas events, with “back-offs,” heavy gas estimate assumptions throughout the system, and providing gas funds wherever possible.
The KEEP token won’t be used for governance (it’s purely a “work token”). How will changes be negotiated and executed on the initial network? And how will new applications join the Keep Network?
According to Carolyn, running new application contracts will be approved via an Authorizer–a role that each staker can either take or delegate. She describes this as similar to Bitcoin’s governance—you either run the new software or you don’t. In this way this staker can choose which Keep applications they participate in, so if there’s an application (aka a “keep”) you don’t trust, you don’t have to run it.
The Keep dev team will propose new code to the Keep registry, whereupon stakers can authorize it and users can authorize it. If both don’t authorize it, it won’t be used. We can expect more about this from Matt in an explainer, but it will be a fairly simple governance system compared to the other, more complex blockchain governance systems.
What about changes to individual keep applications?
For example, what if there’s a need to change the fee structure of tBTC? Keep applications will all have their own process for making changes, and Keep’s Random Beacon has an upgrade scheme. tBTC has an even more restrictive governance model to be in keeping with Bitcoin’s culture.
tBTC has four governance pieces that will be via privileged key at launch to be used for:
- setting the signing fee for new deposits
- setting the collateral rate for new deposits
- setting the lot sizes for new deposits
- an emergency one-time-use 10-day pause button, in case of a zero-day
While the Keep network (Random Beacon) itself has an upgrade scheme, tBTC as an application has a more restricted process for making changes, relying instead on the results of two independent smart contract audits.
Support for the Future of Keep
How will Keep Network development be supported post-launch? Keep SEZC is one for-profit entity holding 25% of the KEEP supply. Thesis (Keep team) is figuring out the best possible way to make the network sustainable long-term, but haven’t finalized anything yet. The initial plan is to use the parent company (Thesis) to commercialize the network at the application layer and continue to fund development. That process is preparing to begin now that Keep has launched.
Interoperability – Beyond BTC on Ethereum
We could see Keep operating on platforms beyond Ethereum. According to the team, they are leaning heavily toward a Bitcoin-Cosmos pegged zone–a dedicated Cosmos-based blockchain dedicated to introducing the value of BTC to the Cosmos ecosystem. They are also interested in bringing BTC and ZEC to Polkadot, Solana, and Celo, amongst others.
What’s the value proposition here? Why a Cosmos zone AND Ethereum? It’s about interoperability, according to Carolyn. Matt says that they “wanted to start with the chains that are economically relevant today,” and also that “BTC should be everywhere :)”
New Kinds of Keep Applications
What kind of Keeps do you hope to see in the future? What is an exciting, perhaps surprising use-case or idea that devs should know about? Matt rattled off a few medium-term applications:
- AES keeps – private file storage for eg. IPFS, keyed to a smart contract
2. BLS keeps – interoperability with newer, BLS-based chains
3. AES keep + our recent Blake2 EIP – Sia interoperability with file storage
These are interests of Thesis (the Keep team),and they depend on how tBTC goes. Longer term Matt sees using keeps for trusted setups, such as arbitrary SNARKs on Ethereum that would enable fully private smart contracts. “It gets pretty damn fancy.”
Keep in Touch
Thesis (aka Keep team) would love to have you join their Discord server and get staking. Check out how to get a Random Beacon node running here, or you can delegate to professional staking service such as Figment (here).
For announcements, follow them on Twitter: https://twitter.com/keep_project
Special thanks to Matt, Carolyn, and Sloan for spending an hour with Staking Hub to answer our many questions.
Thanks to our Staking Hub community for the thoughtful and impactful questions that inspired high-quality answers. Since you’ve read this far, you might as well join us over in the Staking Hub Telegram channel 🙂
Hopefully you found this useful. Feedback is always welcome! I’m on Twitter.