What is FBTC?

Source: FBTC Website

FBTC is usually referred to as a synthetic asset or an omni-chain version of BTC that allows people to do more than just transact in Bitcoin’s mainnet. It provides a 1.1 backing with real Bitcoin. This way, users maintain original access to their BTC token while trading with the FBTC token.

This way, the platform achieves its primary goal, improving Bitcoin’s utility and income potential. It allows Bitcoin holders to transact in various Defi applications without sacrificing ownership of their original access.

History of the Full-Chain BTC Synthetic Assets Ecosystem

FBTC was incubated by Ignition, an initial dex offering (IDO) platform on the Paid Network that incubated and launched promising projects in the crypto space.

In August 2023, FBTC conducted its first major promotion, “Ignition Sparkle.” This promotion laid the groundwork for its airdrop and gave FBTC the publicity it needed to build a community.

By the beginning of 2024, FBTC had reached a transaction volume of $100 million. By July 2024, Ignition started collaborating with Bybit to improve Bitcoin’s movement on Ethereum’s blockchain.

Over time, FBTC’s vision has attracted some other significant players like Mantle, Antalpha Prime, and Cobo. These partnerships would help develop the FBTC ecosystem.

Features of FBTC: FBTC Swap, Bridge, and Yield Farming

FBTC Swap

The FBTC project has a specific section for acquiring its token. Since Bitcoin is decentralized in design, the swap feature is also decentralized, which means users need to connect a self-custody wallet to swap their assets.

The user would then choose the assets and swap into or out of FBTC, meaning they can convert to FBTC or convert FBTC to other assets. The swap is not exclusive to the FBTC platform.

People can acquire FBTC on Bitcoin using OpenBit or popular Ethereum platforms like Uniswap and Dodo. They can also acquire it on Mantle, Arbitrum, or BNB using the Gate.io web3 wallet.

Bridge

The FBTC bridge is part of the ecosystem that allows cross-chain transactions between Bitcoin, Ethereum, Mantle, and other Blockchain networks. It uses smart contracts, the bridge monitor, and the FBTC gateway.

Most bridge activities require the user to transfer assets to the designated smart contract on the bridge, which would lock those assets and mint their equivalent on the receiving chain. FBTC’s bridge feature supports five blockchains: Ethereum, Binance Smart Chain, Arbitrum One, Mantle, and BOB.

Yield Farming, Liquidity Pools, Money Markets and Multichain

FBTC was designed to increase Bitcoin’s utility in the DeFi space. Thus, FBTC can be used on DeFi platforms for yield farming.

Users can also be exposed to accumulating airdrop points from partner projects, increasing the token’s earning potential. Aside from the yield rate on the farming platform, users can participate in liquidity pools and funding rate arbitrages.

Users can optimize the platform’s liquidity pool, money markets, and multichain features to earn yields. On Agni Finance, users can provide liquidity using the mETH/FBTC pair, while DODO and Uniswap exchange support the WBTC/FBTC pair.

The money markets enable the borrowing and lending of FBTC. Avalon Labs, Lendle, and INIT Capital are three famous protocols that support FBTC borrowing and lending.

Users can also farm FBTC yields across multiple blockchain networks. The Fuel Network, Mezo, and Zircuit support multi-chain yield farming for FBTC.

Core Components of the FBTC Project: Custodial Addresses, Onchain Smart Contracts, and Off-chain Service

Custodial Addresses

The FBTC project is a cross-chain project that allows people to move BTC assets from Bitcoin’s mainnet to other blockchains and networks. To achieve this, the custodial Addresses are very important.

Each user is given These unique BTC addresses when transacting on the FBTC platform. The project uses multi-sig authorization and multi-party computation (MPC) to secure addresses. These addresses have two functionalities: deposit and withdrawal.

The deposit feature monitors incoming BTC assets to calculate the value and mint equivalent FBTC assets for the user. The withdrawal feature treats withdrawal requests as burn requests. It burns the FBTC assets and ensures the user gets the right amount of BTC for their transaction.

Onchain Smart Contracts

The on-chain Smart contract component is divided into two major parts. The FBTC Bridge and the FBTC Minter. Like most EVM-compatible projects, smart contracts on the blockchain are required to automate verification, ownership, and transfer during transactions.

The FBTC bridge smart contracts are mostly user control and security contracts. They handle the minting, burning, and cross-chain transfer of assets while ensuring that the user has the authority to conduct such transactions. They utilize multi-sig verifications that allow multiple users to collaborate and manage their assets in a trustless manner.

The FBTC minter contract works with the bridge contract to verify user authority on the blockchain networks. It also does batch confirmation when a user initiates a batch cross-chain request.

Off-chain Service

The off-chain component comprises the bridge monitor, TSS gateway ad nodes, risk control module, and blockchain nodes.

The bridge monitor observes chain events such as minting, burning, and cross-chain requests. It then validates whether these events meet the blockchain’s requirements and submits this validation to the TSS gateway.

The TSS gateway coordinates the TSD nodes to sign users’ requests. Then, it collects the signed results and broadcasts them to the blockchain.

The risk control module focuses on the overall security of the blockchain. It collaborates with the nodes on the blockchain, which acts similarly to the nodes on Bitcoin’s mainnet.

The FBTC Ecosystem

Source: FBTC website

The FBTC ecosystem is focused on farming yields using BTC tokens, so it is full of platforms and projects for yield farming.

The ecosystem consists of the Solv Protocol, PumpBTC on Babylon, Bedrock, a restaking protocol, and Avalon, Lombard, and OpenBit. DEXs like Merchant Moe, Dodo, Mancake, Agni Finance, and PancakeSwap also support it.

The token can be transacted using Tomo wallet, Token Pocket, and OKX wallet. FBTC’s utility extends to layer two infrastructures like Lorenzo, Fuel, and Mezo, an economic layer for BitcoinFi.

What is FTBC Token?

Source: Coingecko

FBTC serves as the backbone of the ecosystem. BTC holders can use ERC utilities since FBTC is built for DeFi activities. As of 25 November 2024, data from Coingecko, a leading crypto analytics platform, reveals that the FBTC token has a circulating supply of 792 tokens and 12,076 tokens, with an infinite maximum supply. Its supply is determined by the number of tokens BTC holders decide to deposit in its infrastructure.

The token allows for staking, yield farming, and participation in campaigns and airdrops. According to data from Coingecko, FBTC has an all-time high of $99,974.65 (since it mirrors Bitcoin’s price) and an all-time low of $11,469.83 (August 5, 2024). Notably, its all-time low is the lowest price ever paid for FBTC.

Risk Analysis of the Full-Chain BTC Synthetic Assets Ecosystem

Advantages

FBTC is designed to function across multiple blockchain networks. This means transacting with DeFi applications on other blockchains is very easy. This enhances liquidity for Bitcoin holders, enabling them to leverage their assets better.

With the aid of its Multi-party computation, FBTC ensures that users’ assets are managed with adequate authority, removing the possibility of a single point of failure. This decentralized approach reduces the risks usually associated with centralized custody solutions.

Disadvantages

FBTC is entirely dependent on Bitcoin. Holders of FBTC are exposed to anything that negatively affects Bitcoin’s price or functionality. This can be a deterrent for investors who are not comfortable investing in synthetic assets.

Challenges

The FBTC project is relatively new and one project among plenty of BTC-wrapped assets. This would make it difficult for FBTC to stand out.

The FBTC project is also expected to attract liquidity across multiple chains to achieve cross-chain interoperability. A lack of liquidity would lead to slow transactions and negative user experiences.

Finally, the project is part of the crypto space. This means it is susceptible to regulatory uncertainty and price volatility. This could pose calibration problems based on determining each transaction’s minting and burning values.

Audits on FBTC

Source: FBTC Github

FBTC had three independent audits conducted by BlockSec, Mixbytes, and Secure3. The First audit by BlockSec was conducted in May 2024 on the FBTC & Fire Bridge Contracts. BlockSec has previously audited smart contract tools such as Phalcon, MetaSleuth, and MetaSuites.

Its audit of FBTC’s system revealed three low-risk vulnerabilities: potential front-running DoS attacks, a lack of checking for key parameters, and a lack of verification for the target chain in cross-chain requests. FBTC’s second version fixed the three vulnerabilities.

The Secure3 audit firm conducted the next audit in June 2024. The audit focused on identifying vulnerabilities and issues in the smart contract source code. The report identified 19 security issues. Three issues were ranked as medium risk, eight were ranked low, and eight were simply for the project’s information.

At the end of the audit, some of the vulnerabilities were fixed, while some were acknowledged for future attention.

The final audit was conducted in June 2024 by Mixbyte. The audit focused on the EVM component of the FBTC bridge, evaluating the Solidity smart contracts that handle minting, bridging, and burning. The report found seven low-class vulnerabilities that the project is addressing.

Transparency and Proof of Assets on FBTC

FBTC has a proof-of-asset section that transparently monitors and displays BTC reserves. It does this through Chainlink’s proof-of-reserve service for the FBTC project. The system uses a decentralized Oracle Network to automatically update on-chain reserve data, ensuring FBTC is pegged 1:1 to Bitcoin.

The display shows the breakdown of FBTC on the different chains and the amount locked in projects. It also shows the Bitcoin custodian wallet addresses for independent evaluation.

Competitive Analysis

Although FBTC and Wrapped Bitcoin (WBTC) are both technologies that enhance Bitcoin’s utility within the decentralized finance ecosystem, they possess different objectives.

FBTC, on one end, uses cross-chain interoperability, which allows it to operate on multiple blockchains, facilitating diverse use cases. WBTC is a widely used ERC20 token representing Bitcoin on the Ethereum blockchain. This ERC-20 token can be used in Ethereum-based applications.

Although FBTC employs an omni-chain approach with MPC for secure custody and cross-chain functionality, WBTC, on the other hand, operates primarily within the Ethereum ecosystem as an ERC20 token, so it focuses on inheriting Ethereum’s security.

FBTC is positioned as a pioneering synthetic asset aiming to bridge liquidity gaps between Bitcoin and other blockchain ecosystems. This means it can integrate with numerous networks. WBTC was established as a leading token for integrating Bitcoin into Ethereum’s DeFi landscape, which limits its adoption capacity.

How Can You Own FBTC?

Users can follow a simple process to own FBTC tokens and become a part of the FBTC ecosystem.

Setup a Wallet

One way to own FBTC tokens is to purchase them through an exchange. For this, the user must create a Gate.io account, complete the KYC process, and add funds to the account to buy the token.

Utilize the FBTC Tokens

Once users have acquired FBTC tokens, they can explore the FBTC ecosystem by participating in DeFi, yield farming, and bridging.

Take action on FBTC

Learn more about the FBTC project on Gate.io.