Threshold

What is Threshold (T)?

Threshold is a decentralized, Ethereum-based protocol that provides a suite of threshold cryptography services that power user sovereignty on the blockchain.

By requiring a minimum or threshold number of independent entities, like nodes in a network, to cooperate, threshold cryptography can distribute sensitive operations. This eliminates the need to trust a centralized party and can unlock greater utility and usability for digital assets.

Simply put, Threshold is a way to keep user information and digital assets private while using public blockchains. It combines the infrastructure developed by Keep Network and NuCypher’s privacy tools while remaining an entirely community-driven network.

What is Codename Keanu?

Threshold went live in the new year of 2022, but its story has far more significance than simply a well-timed mainnet launch. Rather, Threshold marks a significant milestone in the blockchain industry since it is the first on-chain merger to be recorded.

A post on the Keep Network forum sparked discussion in its community and that of NuCypher, the other subject of the post. Eventually, the snowballing discussions led to a decentralized vote in both communities where every member was allowed to decide whether they supported a merger and how exactly it would happen.

The merger was a natural evolution since both projects had independently had the common goal of providing tools for user privacy on the blockchain and had built technology based on the same principles.

Multiple iterations of snapshot proposals were submitted, reviewed, and revised on both forums before culminating in the RC0 proposal. The process was referred to as Codename Keanu, joining the first two letters of both projects. It was also happily referencing actor Keanu Reeves, whose roles in works like the Matrix trilogy and Cyberpunk 2077 have made him a particular favorite.

To execute the merge, three main contracts had to be deployed. These included the T token contract reflecting the project post-merge, a basic staking contract, and a vending machine contract converting KEEP and NU into T. Before these contracts were deployed, Keep and NuCypher inflation was paused.

How Does Threshold Work?

Having merged the Keep Network and NuCypher projects, Threshold operates as a unified network bringing the Keep and NuCypher technologies together.

Keep’s ability to encrypt, store, and transmit private data through off-chain containers is central to Threshold. These “keeps” are accessible to smart contracts, compromising neither the privacy of users nor the transparency of the network.

Atop Keep’s infrastructure come NuCypher’s privacy tools. These include managing secrets across different environments, granting and revoking access to sensitive information, and processing encrypted data without revealing it. The Threshold network will also include NuCypher’s Proxy Re-encryption tools which delegate decryption rights.

Going forward, Threshold intends to be a one-stop solution with a comprehensive set of tools for user sovereignty.

What makes Threshold Unique?

Threshold is unique thanks to its flagship dApp (decentralized application), tBTC. A decentralized, highly secure, fully open-source Bitcoin-to-Ethereum bridge, tBTC allows Bitcoin holders to participate safely in DeFi (decentralized finance) on Ethereum without needing to lose custody of their BTC.

Most solutions offering BTC-ETH bridging require users to send their Bitcoins to an intermediary in exchange for an Ethereum token representing their original asset. This model creates a point of centralization, is vulnerable to censorship, and requires users to trust a third-party custodian.

Threshold’s tBTC, whose upgrade to its second iteration is imminent, replaces centralized intermediaries with a randomly selected group of node operators. This group works together to secure deposited BTC using threshold cryptography. This means that tBTC v2 will require a majority threshold agreement before operators perform any actions with users’ BTC.

How is the Threshold Network Secured?

Threshold is secured by node operators who stake T tokens to earn rewards. Using a proof-of-stake consensus mechanism, Threshold allows anyone to stake T tokens and become a core network component.

The smart contracts used by Threshold, including the vending machine contracts, T token contracts, and staking contracts, have been audited by Certik and Chainsecurity. Furthermore, tBTC v2 has also been audited by Least Authority.

What is the Use of T?

T, the native token of the Threshold network, can be used for staking if holders are interested in running a node. However, as a token holder who doesn’t wish to run a node, T tokens can still be used to participate in governance and for voting on what’s next for the protocol.

The T token can also be used to provide liquidity in DeFi. Both the Curve and Balancer DeFi dApps feature T + ETH liquidity pools that token holders can add to earn rewards.

Who Controls Threshold?

Threshold is governed by the Threshold DAO, a decentralized autonomous organization created by merging the Keep and NuCypher communities. Formed through decentralized decision-making via a decentralized vote, Threshold DAO utilizes a three-pronged governance structure.

Within Threshold DAO, a StakerDAO holds the majority of actual decision-making power. A TokenHolderDAO manages the treasury, token issuance, and governance changes. Finally, an elected council made up of Keep and NuCypher representatives sets staker rewards and has the power to veto proposals.

How Much T is In Circulation?

Threshold has a total supply of 10 billion T tokens, 1 billion of which has been allocated to the Threshold DAO. The remaining 9 billion T tokens have been split equally for conversion from KEEP and NU tokens.

The vending machine contracts and static conversion ratios from NU and KEEP into T tokens will be kept alive indefinitely. This means there is no time pressure or disadvantage to waiting to upgrade from NU or KEEP into T, allowing holders to complete the process carefully and at their leisure.

NU is converted at a factor of approximately 3.26 T, and KEEP is converted at around 4.78 T. Currently, the T token has a circulating supply of over 8.2 billion out of its capped maximum of 10 billion.

How Do You Buy T?

As mentioned, both the Curve and Balancer dApps on Ethereum have T + ETH pools with significant liquidity that you can use to buy T tokens. Uniswap and SushiSwap are also great options where decentralized exchanges are concerned.

How Do You Store T?

You can store T tokens in any Ethereum-based cryptocurrency wallet. Since it hosts the most tokens and the biggest ecosystem of dApps, Ethereum doesn’t lack options regarding wallets.

A hot wallet like Metamask is very useful when interacting with various dApps, and you can easily participate in DeFi using it. On the other hand, if you’d rather just HODL, hardware wallets like Ledger and Trezor might suit you well.

Is T a Good Investment?

Threshold is a project bringing privacy to the public blockchain while also operating with the ideals of interoperability and decentralization at the forefront of its philosophy. Its landmark decentralized merger may also set a precedent for the greater advancement of the industry. The refinement of the protocol and a successful launch of tBTC v2 could see Threshold become far more than a mere footnote.