The (worrying) state of xBTC

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I’m creating this post to work as a central place for more information on xBTC.

Intro

A short intro taken from Coinbase’s website in case you don’t know what xBTC is about:

Wrapped Bitcoin on Stacks (xBTC) is a 1:1 equivalent of BTC on the Stacks network. Wrapped.com lets investors use their digital assets to lend, borrow, and trade on all major DeFi platforms. Each wrapped asset is fully-collateralized and held with a qualified custodian. Wrapped.com is a collaboration of Tokensoft Inc. with leading custodians and other financial institutions. Tokensoft provides the technology layer via Wrapped.com that allows users to wrap their BTC into xBTC.

Here is the link to the token contract in the Stacks Network: Token - SP3DX…0R2PR.Wrapped-Bitcoin

The problem

As many might know, there’s currently no viable way for holders to peg out of xBTC. The only active pool, afaik, is Arkadiko’s, but there liquidity is very thin and the price heavily distorted. Of course, many users started complaining and asking questions about the project and in June jw shared this in the Stacks discord:

Hey folks, we’ve seen some confusion in the community around support for xUSD and xBTC - it previously mentioned that the Stacks Foundation is responsible for this asset; however, a company called Tokensoft is the operator. Below, you can learn how to get support from Tokensoft for your xBTC and xUSD assets if needed. Quick note on what’s ahead In the future, xBTC will be merged into sBTC. There will be a migration process, and users will be supported through any part of the process they are responsible for. The goal is to make this very seamless, and we expect the migration will happen after sBTC’s cap is fully removed. We mention this so that if you prefer, you can sit tight on your xBTC and know it’ll migrate to sBTC anyway. Moving assets today If you want to exit either xUSD or xBTC today, that’s also no problem! You can exit xUSD to USDC and xBTC to BTC by following this process from Tokensoft:

  1. To get started, you will onboard at the custodian here: https://app.swarm.com/. Once done, wait for you account to be completed/verified.,

  2. After your account is confirmed as setup, send the following to [email protected] a. Settlement address (where you want the xBTC or xUSD returned to you) b. Stacks address (The Stacks wallet you’ll be sending from),

  3. Send the xBTC or xUSD to this burn address: SP3Y72B4DZ7VGDRKBR8YDX08SJGCMN6K5JKF2F13V,

We hope this helps, thanks to Tokensoft, LNow, Mitchell from the Stacks Foundation, and others who have helped us clear this up and bring you this info!

Since then I haven’t heard any updates on the status of this migration. I tried reaching out to the tokensoft team asking some questions and confirming this was indeed the process, but all I got was a very short answer, a few weeks later, to ineed send my xBTC to this burn address. Now, if you’re planning to move any important (for you) quantity of xBTC, that’s not the kind of process that will make you confident.

Moreover, asking people to transfer assets in exchange of them giving you something - they don’t even explain what - in a blockchain/defi ecossystem is beyond surreal. Writing a smart contract to handle this should not be so hard, except for the funding part. But I assume that, since that was a 1:1 peg, all the BTC (37.34473978 BTC or 4.5 Million Dollars) is still safely stored somewhere. Without the sBTC cap, it should be somewhat straightforward to give everyone a 1:1 way out of xBTC while putting this 4 million dollars to work again.

Now, for all the xBTC holders and for all DeFi participants in general, would be nice to hear from anyone with involvement or information on the project what we can expect and what the timeline is. The current state of the project is unacceptable. If you’re looking for information, if you have more information or if you know someone who might have, please let us know in this topic.

Thank you.

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I just found this today after countless hours of trying to exchange xbtc to anything else. I can’t believe this is the case.

Also, to note; I went to appswarmcom and there’s no place to onboard or register anymore…that I can see anyway?

I then sent an email to supporttokensoftio and it bounced back immediately with a “Message not delivered” - Mail Relay Access Denied 554 - 5.7.1 error. I then ventured over to tokensoftio and the domain says that it’s just registered at gandinet but nothing else.

Yikes!! What can people like me do? Do we have any timeline on the migration? This is scary and frustrating. I needed the funds in there for something but will now have to look elsewhere while I dedicate time to figuring out this mess.

Imagine if someone sent xbtc to the burn address and now the email doesn’t even register?? What is happening with this project. This is no longer in the “unacceptable” phase that @vicnicius mentioned above but whatever is a few steps lower…like “probably illegal”, “dangerous” or something worse that I can’t think of at the moment.

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Hello - I’m the maintainer of the xBTC (not the issuer/custodian), let me spend some time updating the information. Looks like it just went stale.

Just one note, when off boarding the xBTC to BTC, it’s best to have larger amounts so the custodian doesn’t make a fuss. Its harder to do a lot of small amounts, $10k and up is preferred.

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Hi @masonic thanks for getting in touch here. Would be nice if the issuer and the custodian (if they’re not the same entity) would get more involved in this, so we can strive for a proper solution.

As I write this, $10K would be around 0,094 BTC. Currently xBTC has almost 5K holders, of which only 15 are holding $10K or more (that’s probably the reason why there isn’t a lot more pressure to get a proper solution for this), so if the solution leaves 99.9% of the token holders out, than it’s not a proper solution.

Getting back to what I said in my first post, given that we have sBTC, a technical path for a solution that allows anyone to peg even a single sat out of sBTC is totally feasible. We only need issuers/custodians/leaders of the project (would be nice if you could name them) to stick to the original promise and deliver on it completely, even if the project is seeing the lights turn off.

They should also do it fast. The opportunity cost is also extremely damaging. I’m sure many holders would have liked to have the chance to cash out on recent BTC highs, but this opportunity was taken of them because of the project’s incompetence to deliver on its original promise.

I’d urge you and the others involved in the project to please give the community a proper solution to this.

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@masonic Here is a Clarity contract (+web app) that let users convert xBTC to sBTC in a trustless way: GitHub - friedger/clarity-xbtc-sbtc

It “just” requires wrapping the backing btc to sbtc and sending it to the contract.

Users can then convert to sbtc at their convenience. xBTC is then stuck in the swapping contract (and could be burnt if wished)

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Alternatively, we can adapt the contract and find an sbtc whale who places some sbtc into the contract in exchange for xbtc, then the whale can unwrap xbtc.

What are the next steps?

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Thank you very much for the help @friedger! Like he showed, @masonic, a technical solution should be straightforward in Stacks and the path to solve the xBTC problem the correct way is clearly layed-out. All we need now is the commitment of the project owners and we should have a very positive solution. Could you urgently give us an answer on when this solution can be available for holders?

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You are a gift to this community! Thank you for spending your time on this issue! Hoping it gets resolved soon for all of us.

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Looking for a whale

  • holding 37.5 sBTC and then
  • swap it for xBTC and
  • convert to BTC via the custodian and
  • wrap back to sBTC.
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Can we change the title to “The State of xBTC”? Sounds nicer

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Essentially what happens … let’s say the sBTC TVL is 1BTC. and the xBTC is 1BTC.

Now the sBTC TVL would be 2BTC, the xBTC would be 0 BTC. However, there is now a 1:1 pegged one-way swap from xBTC to sBTC and you can just keep that onchain in perpetuity.

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Can you also just push the custodial BTC from xBTC to sBTC. Then do a pegged 1:1 swap from xBTC to sBTC?

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You can definitely do it. All you have to do is peg in the btc via the sbtc bridge. I’m sure for a big sum the sBTC team/someone on the foundation would be happy to help make sure all is done in a safe way or point out in the right direction, but it should be a straightforward operation.

To avoid the perpetual minting the xbtc contract should be “deactivated” first. You can do so by removing the permissions for everyone in the contract so no principal can mint/perform any admin action.

I’ll be happy to change the title once we have a solution, which already took way too long tbh.

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If that is the way to go, then happy to update the swapping contract

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There will not be an accidental mint from the xBTC the way it is now. Here is what is necessary:
This not in order.

  1. xBTC remove minter
  2. xBTC remove burner
  3. xBTC Custodian send test 0.001 BTC into sBTC BTC custody address (ensure no adverse affects, please educate me on potential issues)
  4. xBTC Custodian to send the remainder into sBTC BTC custody address
  5. Setup a 1:1 one-way peg on an AMM of choice (who is available? we did this before with Alex)
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@friedger please let me know if this is possible and I can help as much as I can with coordination and pushing forward.

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Let’s make it happen