Rootstock Fundamentals #3: All You’ll Ever Need to Know About RBTC

Rootstock Fundamentals is back for a third episode — and this time, we’re exploring RBTC with senior engineering director José Dahlquist.

RBTC is a “Smart Bitcoin” that allows BTC owners to interact with DeFi protocols and decentralized apps — boosting the utility of the world’s best-known cryptocurrency. 

José has often described RBTC as a little bit like a stablecoin because this digital asset always mirrors Bitcoin’s value.

“It’s running side by side with Bitcoin,” José explains. “It’s backed and secured by Bitcoin. It’s similar to Wrapped BTC, but it’s uncustodied because it’s held in a smart contract — and it is placed in that smart contract by thousands of different actors who do that independently.”

Listen to the full episode on YouTube.

But first, what is RBTC?

One of Rootstock’s unique features for builders is how it allows EVM-compatible smart contracts to be secured by the Bitcoin network, and RBTC has a crucial use case here.

“You can use RBTC to pay for gas, to execute smart contracts, to pay for transactions, but you can also hold it,” José adds. “And because it is a direct one-to-one peg with Bitcoin, it will appreciate or decrease along with Bitcoin at the same time.”

Of course, as was explained in the second episode of Rootstock Fundamentals about the cryptographic connection to Bitcoin, Rootstock is tied to Bitcoin through merged mining.

What is the relationship between RBTC and BTC though?

“[RBTC] It’s BTC running on a separate blockchain, but it’s backed by Bitcoin” José explains. “So it’s basically Bitcoin, but with smart capabilities, it allows you to execute smart contracts, and that’s the simplest I can go. And to go one slight technical level, deeper, it’s an ERC 20 token.”

The 2-way-peg

Conversions from BTC to RBTC, and vice versa, are executed through a two-way peg. As well as leveraging the Bitcoin network’s Proof-of-Work consensus mechanism, specialized hardware devices known as PowHSMs add an additional layer of security for private keys.

“This is a common Bitcoin script that allows multiple signatories to allow a certain operation to exist once a user sends BTC to this specific address. There is this process called the peg in that will take this transaction, inform it into the bridge, and once the bridge takes notice of this operation, it’s going to release RBTC into a given Rootstock address.”

José explains that there are many different ways for users to get their hands on RBTC. It’s available on a series of major centralized and decentralized exchanges. A number of key crypto wallets — including Exodus and Ledger Live — also support Rootstock and enable their customers to receive and transact using RBTC.

Advanced users can also obtain RBTC in a native, trust-minimized and inexpensive fashion through the two-way peg, which means there’s no reliance on third parties or external tools. This involves sending BTC to Rootstock’s deposit address on the Bitcoin network, and then waiting for the RBTC to be released on the sidechain. All told, it’s a process that takes about 16 hours to be finalized.

The multisignatory in the PowPeg

José goes on to explain the multisignatory in the PowPeg by saying: “A multi signature, again, is a Bitcoin script that requires a certain amount of signatures before it can actually be spent. So it doesn’t allow any specific actor to decide on where to send the funds or not. It requires half plus one of signatories to be in accordance with the operation.”

But what exactly are these signatories?

As José explains, signatories are individual community members and builders on the Rootstock ecosystem whose devices receive an anonymous request from the bridge whenever a user submits a request to move BTC to RBTC and vice versa. 

“These are companies that belong to the community… They cannot decide on how to spend this fund. They are simply responding to the stimulus coming from the bridge.”

Are there simpler ways to get RBTC?

“There is also the Flyover Protocol, which is way faster than the regular two-way peg — but it has an additional fee because there is a liquidity provision in the middle,” José says. “Actors are advancing funds, so we don’t have to wait as a user for the bridge to actually process all the transactions.” 

Peer-to-peer swaps are available — and new connections between Rootstock and other networks are continually emerging, too. This means anyone who’s interested in acquiring some RBTC can choose a method depending on their crypto-savvyness and based on whether speed or cost is more important to them. 

Check this comprehensive list of ways to get RBTC.

Highly secured

Daniel proceeds to talk to José about the infrastructure’s resilience, asking: “Explain it to me like I’m a criminal mastermind. I am living on an island in the middle of the Pacific. I have somehow come across some nuclear weapons. I’ve got submarines. Maybe I’ve got some underground data centers and a white cat. How would you attack the two-way peg?”

The answer is simple: it would take a 51% attack. “It’s economically and computationally possible, but almost entirely infeasible and slightly ridiculous to suggest that you would amass that level of power to attack the two-way peg,” José explains.

“It’s not possible to physically interact with the hardware security modules as a human being. You cannot steal them [RBTC], you cannot interact with them, you cannot do anything with them physically that would allow you to in some way access the Bitcoins in the two-way peg. Because the hardware security modules only in only are only programmed to interact with the two-way peg smart contract.”

He goes on to explain that work is continually ongoing behind the scenes to improve security and decentralization — and just like Bitcoin, Rootstock has an ambition to be far from static.

A research team from RootstockLabs and Fairgate got together to work on an advanced computational layer for Bitcoin using the theories of BitVMX which will be implemented to create a trustless bridge between Bitcoin and Rootstock, or any other sidechain for that matter.  

“It would be a decentralized number of validators that will verify that a certain Rootstock transaction happened that implies moving bitcoins on Bitcoin, without having to even wait that much for that operation to happen, [and] without having to pay that much for that operation to happen. That is like the most simplistic and futuristic way of shaping it.”

“It still remains a premium example of how you can bridge Bitcoin out of Bitcoin and put it to work on another network,” José adds. “Our network has never seen any downtime whatsoever, and that’s not an easy feat.”

More than anything, José says RootstockLabs is continually on the lookout for feedback from users: “Whatever the community needs to express, anything that you think that’s going to contribute to our expansion, to our implementations, reach out to us through Discord, through X, through whatever means, and we will look for it.”

 

Listen to the full episode of Rootstock Fundamentals with Daniel and José on YouTube — and stay tuned for more interviews coming soon on Spotify.