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Messari: What are the impacts of the merger between Keep Network and NuCypher?

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Messari interprets the advantages of Nucypher and Keep Network merging mainnet Threshold

Original title: "Crossing the Threshold of Decentralized M&A"

Original author: Ryan Swanson, Messari

Original compilation: Hu Tao, chain catcher

As the first product of decentralized application merger, Threshold (Keep Network / NuCypher) Looking to create the de facto encrypted network for blockchains and cryptocurrencies, bringing BTC to the Ethereum network with a highly scalable decentralized solution (tBTC v2). Thanks in part to Keep’s previous iterations of tBTC and NuCypher’s expanding node network, Threshold aims to provide the first fully decentralized Bitcoin-to-Ethereum asset bridge, a space powered by centralized custody provider BitGo on the back of some notable partners. Control with help.

Background

Keep Network

Keep Network was founded in 2017 by Matt Luongo and Corbin Pon as a privacy layer for public blockchains. KEEP utilizes off-chain data containers capable of interacting with smart contracts. These off-chain data containers, called "Keeps," are managed by a distributed network of Keep operators called "Signers," which are randomly assigned portions of user data, further protecting information from unwanted access.

By segmenting and encrypting the data of multiple signers, accessing the full message would require multiple parties to collude and agree to merge their segments, which seems to be inconsistent with their their own interests run counter to each other. The system relies on Keep Network's main application, Secure Multi-Party Computation (sMPC), which ensures that a single signer cannot decode information stored on the network.

NuCypher

NuCypher was founded in 2015 by Michael Egorov and MacLane Wilkison with the goal of Provides data protection and encryption and still allows users to securely move information and computing to the cloud. NuCypher's core technology is called Proxy Re-Encryption (PRE), which allows for end-to-end data encryption, where a proxy entity converts encrypted data from key to key ("re-encryption") without decrypting the source data. PRE ensures that data owners can grant and revoke access to private data.

In 2017, NuCypher developed the company into a blockchain-based operator, integrating smart contract technology, threshold cryptography and Token-based decentralized foundation A facility model that establishes PRE as a decentralized protocol. Today, NuCypher's PRE technology is focused on providing cryptographic access control for distributed applications and protocols, rather than traditional data-sensitive industries like healthcare and traditional finance.

merge

M&A landscape:

In traditional finance, mergers and acquisitions make up the competitiveness of some of the largest banks and financial institutions and have been the catalyst for the lucrative bonus schemes pursued by Wall Street investment bankers. 2021 was a record year for mergers and acquisitions, with 62,193 deals worth more than $5.8 trillion in cumulative deals, up 64% from 2020 and surpassing the previous record of $4.55 trillion set in 2007, according to Reuters.

The profitability of M&A deals, combined with the increasing number of blockchain-based projects today, is expected to play a big role in crypto, which is not surprising as the winners get share, and found resources to be more effective together than competitors. But what is the outlook for M&A in the crypto space with an unconventional ownership model driven by the community rather than the board?

As with most cryptocurrencies, the definition of M&A varies from announcement to announcement and often looks like Google buying a private startup for technology or Sprint vs. t-Mobile The merger is different, which wants to take stakes from AT&t and Verizon.

Crypto M&A can come in many different forms, and in 2021 the field took its first steps into the world of M&A. Alameda Research's acquisition of RenVM's technical team was essentially a team-wide hiring spree, bringing the Ren team into the Alameda team and prioritizing the team's focus on Solana ecosystem interoperability. Yearn.finance has announced multiple “mergers” that are better described as platform integrations rather than outright mergers or mutual purchases. On the acquisition front, Polygon has been aggressive in acquiring Hermez Network and Mir for $250 million and $400 million, respectively.

When it comes to truly decentralized M&A, the scope becomes even smaller. Recently, Fei Protocol and Rari Capital agreed to integrate their platforms in an effort to occupy the liquidity supply space. Rari's RGT Token To be exchanged with TRIBE at a ratio of 10:267, Fei Protocol assumes all liability of Rari in connection with the $10 million theft from the platform in May 2021.

From a governance perspective, TRIBE and RGT holders seem to be largely on board with the proposal getting 90% of the votes from the Fei protocol community and Rari members93 % of votes in favor. Now, as the Rari and Fei communities move forward with their merger from a product and governance standpoint, let’s dive into one of the earliest mergers in this space consisting of NuCypher and KEEP — into Threshold.

Threshold:

Originally announced in March 2021 under the codename KEANU (Ke ep A nd Nu Cypher), the merger of the two crypto platforms has become two The first merger of a decentralized protocol. The Threshold merger happened at the code level of the respective protocols, known as a "hard merge", where Keep and NuCypher ceased to exist as separate protocols, and the successor protocol, Threshold, continues to provide all the services that Keep/NuCypher previously provided, and hopes to expand its services to become any A platform for Form Threshold Cryptography.

Combining code is one thing, but combining two stakeholder groups is quite another. While the original merge proposal was published in March 2021, both the Keep and NuCypher communities voted in favor (78% KEEP / 100% NU) until June 11th on RC0 Token proposal. While the adopted protocol was neatly named RC0, the proposal actually went through 6 different iterations, with members from both communities changing from the name, the former Token Various aspects such as exchange rate and governance structure have been discussed back and forth.

Finally, the two communities are T6 Token The proposal was agreed upon, with both parties receiving an equal share of the new Threshold network and establishing a separate Threshold DAO treasury. T6 Token The biggest challenge for the proposal to complete is (1) leaving no Token , (2) will "zombie" KEEP/NU Token and (3) establish a strong risk management system for subsequent DAOs.

As part of RC0, KEEP and NU Token The exchange rates for are set to 1:4.78 and 1:3.26, respectively. The rate is based on each Token , and results in each protocol representing 45% of the Threshold network. The initial supply of T is set at 10 billion, of which 10% is reserved for the Threshold DAO. Now, with the conversion rate and Token With the name finalized, the real work can begin - finalizing the DAO governance.

Governance:

Inspired by the success of Compound Finance, the Threshold team decided to build a three-pronged system that included a delegate Token A bicameral DAO of token holders (Token Holder DAO) and network stakers (Staker DAO), and an elected multi-signature committee.

Most governance control is given to the Staker DAO, however, each branch operates within a set of checks and balances. Both Token Holder DAO and Staker DAO have the ability to propose on-chain voting, delegate voting and execute proposals. Token Holder DAO by T Token holders, pledgers and Token Consists of people who deposit into the Covering Pool (a component of tBTC).

On the other hand, Staker DAO is composed of stakers whose voting power depends on their stake in T Token relative share in . As mentioned earlier, the majority of protocol governance is handled by the Staker DAO, which makes sense since that team is focused on supporting the protocol network and its various services. on the other hand, Token The holder DAO is responsible for organizing more "capital market" needs,

Finally, the Multisig Council consists of 9 elected representatives, 4 of which are held by NU Token Holder elected, 4 seats by KEEP Token Holders are elected. The remaining seats are determined by a combined community vote. Each member will serve in their role for one year and actively contribute to the development of Threshold. Council members currently have no term limits, but seats can be removed by token vote. The committee's governance power is focused on proposals with protocol-wide impact, including staking reward management and veto power, which will be used as a fail-safe for any harmful proposals that pass.

Merger Benefits:

Threshold combines the strengths of Keep and NuCypher while avoiding their two biggest hurdles. For Keep, the merger increased the size of the off-chain data storage network by increasing the number of network nodes from about 200 to more than about 2,000. The addition of validators creates a more decentralized set of signers, reducing the risk of collusion.

On the other hand, NuCypher's PRE inherits existing Keep-built applications whose use requires scalable security. Keep's primary use case is a Bitcoin-to-Ethereum asset bridge (tBTC), which utilizes their off-chain storage network to keep Bitcoin in a decentralized encrypted state, while the synthetic tBTC can be deployed on the Ethereum network.

As part of the merged roadmap, Threshold plans to upgrade to tBTC v2, which will bring tBTC on a scalable network with lower cost and higher security all the original benefits of .

tBTC and Ethereum demand for Bitcoin:

Bitcoin was the original distributed ledger, the big bang of cryptocurrencies as we know them today. The problem with Bitcoin (positively for some) is that it's not particularly "smart" for a next-generation currency, but it's very secure. While PoW has received mixed reviews, depending on who you ask, the amount and cost of "work" involved in Bitcoin's consensus mechanism creates an extremely secure digital currency with minimal risk of corruption.

Bitcoin mining is a multi-billion dollar publicly traded industry, with BTC itself accounting for approximately 40% of the entire crypto market. While BTC is many people's first investment in cryptocurrency, most end up going down the rabbit hole and transitioning to smart contracts where DeFi, NFTs, P2E, and all the rest of the Web 3.0 resides. Security is traded for innovation, but while the crypto ecosystem today has built decentralized bridges and sidechains for every layer1, there is still no true decentralized connection between Bitcoin and the rest of the crypto world.

ERC-20 Bitcoin does exist, Wrapped BTC is one of the more popular implementations in DeFi, but wBTC, along with 9 of the other top 10 solutions, are either Decentralized, or operated through a hybrid model, which is essentially decentralized with a kill switch.

The table below highlights how centralized Bitcoin is on Ethereum, with wBTC almost 4x that of the next nine platforms combined. The top ten solutions hold less than 2% of the total BTC in circulation. This begs the question, do BTC holders distrust centralized systems, or do they simply want nothing to do with other cryptocurrencies? Threshold is betting on the former.

The merger of Keep and NuCypher makes tBTC v2 a viable competitor in the Bitcoin-to-Ethereum solution space, providing wBTC and other top ERC-20 implementations with low-cost, no Permissioned and decentralized alternatives. The question remains, is there a need for a more decentralized BTC-to-Ethereum asset bridge?

Conclusion/Roadmap:

Going forward, the Threshold team remains focused on launching tBTC v2 and taking a larger share of the bridging pie from Bitcoin to Ethereum assets, currently targeting 2022 Reached a TVL of US$7 billion by the end of the year. While DeFi is built on the concept of an active asset, most Bitcoin holders seem to be happy with their current positions. Institutional investors who are increasingly interested in crypto are all starting with Bitcoin, so maybe this new group of investors is more inclined to deploy their Bitcoin on Ethereum or other blockchains, but they will want to Want to use a decentralized medium?

Threshold sees an urgent need for the next crypto cycle, and the team envisions its bridge architecture as the preferred method of bringing BTC to Ethereum. Additionally, Threshold DAO is developing a stablecoin (thUSD) to complement tBTC with compatible risk-off assets collateralized by tBTC.

The team believes that thUSD can eventually support decentralized lending and lending of real assets, such as mortgages or car loans. Overall, the two communities seem to have come together smoothly and are now focused on making sure all the work on the decentralized merger really pays off. While many in the cryptocurrency space may not have directly used either platform in the past, that could change as Threshold looks set to take its place in the new year.