TBTC allows people to act on the Ethereum blockchain using Bitcoin. TBTC is minted when a user provides proof of their BTC deposit, and it can be thought of as simultaneously three types of tokens: an ERC-20 token, an ERC-721 token, and a stablecoin.
TBTC is a standard ERC-20 token that can act on the Ethereum blockchain. ERC-20 is the common technical standard for all Ethereum tokens, which allows them to communicate and interact with one another.
TBTC is also interchangeable with the TBTC Deposit Token (TDT) through a contract called the vending machine, which manages the exchange of TDT for TBTC and vice-versa.
- Given a TDT, it will mint TBTC.
- Given TBTC, it will burn it and return a specific TDT.
Read more about TDTs and the vending machine here.
A TDT is a non-fungible ERC-721 token (NFT) that represents a claim to a deposit’s underlying UTXO on the Bitcoin blockchain. ERC-721 differs from ERC-20 in that these assets are not fungible. Think of a TDT like the ticket from a strict coat check: without it, you can’t get your BTC back.
Because TBTC is interchangeable with TDT, they can be considered two states of the same fundamental asset.
Finally, TBTC is a Bitcoin stablecoin: it is fully backed by BTC at a rate of 1:1. Because users must deposit BTC in order to mint TBTC, there is always enough Bitcoin locked in the network to support this. tBTC functions as a stablecoin for Bitcoin similarly to how MakerDAO’s DAI functions as a stablecoin for USD.