This TIP is a continuation of [TIP-98](https://forum.threshold.network/t/tip-098-the-future-of-threshold/1012) that expands on the role of tLabs and the expected DAO restructure. Given the meaningful updates and changes from the original TIP, it is re-introduced as TIP-100, rather than an amendment. --- tBTC has an opportunity to become the canonical cross-chain liquidity hub for Bitcoin, with >10x today’s TVL and bridge velocity. Threshold can capture value with revamped tokenomics that couple the success of T with the success of tBTC. But achieving this goal requires the DAO to commit and compete: the path to success is narrow and requires immediate action. Threshold currently lacks strategic focus and the internal structure necessary to successfully execute in an increasingly competitive market. To remedy this, tLabs will lead a DAO reorganization with a singular focus on scaling tBTC TVL and bridge velocity, while pivoting the network to profitability and cutting distractions that don’t directly contribute to winning. **Threshold as a single app network for tBTC** Threshold was originally envisioned as a multi-application threshold cryptography network. Unfortunately, this has introduced a significant amount of complexity, making internal alignment and external messaging around Threshold’s purpose extremely difficult. To provide clarity of purpose and maximize the likelihood of success for both applications, TACo and tBTC will become separate networks **with the end of staking emissions ([TIP-92](https://forum.threshold.network/t/tip-092-make-t-great-again-part-1-eliminate-inflation/984)) by February 15** (with a small carveout for TACo). This will allow both tBTC and TACo to clarify messaging, go to market, and scale faster. *TACo as an independent network* TACo is picking up momentum with revenue growth, high-profile partnerships, greater prominence/legitimacy, and a pipeline of credible adopting developers. To preserve this momentum, TACo must have full control over its own destiny and continuity in its existing staker network while minimizing any possible disruption to adopters. Pending approval of this TIP, the TACo service will migrate away from Threshold to a new home – which will take place over a transition period of approximately six months. The destination and migration process will be determined and proposed by the TACo team prior to the end of the transition period. This autonomy will allow TACo’s new protocol to further prioritize independent stakers, and potentially increase compatibility with other Web3 infrastructure. This proposal ensures TACo stakers will continue to be compensated for their availability and service provision for at least six months. Importantly, this continued compensation will not require an additional mint, as there are sufficient tokens left over from [TIP-94](https://forum.threshold.network/t/tip-94-mint-3-months-of-staking-rewards/997) to cover TACo’s transition period, if the current rewards regime is ended by February 15. This compensation may include an additional subsidy, funded by NuCypher. *Threshold as a tBTC appchain* The tBTC ledger currently resides on ETH L1, resulting in a poor cross-chain UX and making adding support for new chains a significant engineering effort. Rearchitecting Threshold into a tBTC appchain will flip the integration model by letting new chains integrate with tBTC, rather than tBTC integrating with them. Threshold would effectively become an execution environment capable of accepting light clients from any arbitrary chain, enabling the rapid expansion of tBTC availability and direct minting UX across the entire blockchain ecosystem. An appchain architecture also provides greater flexibility around potential future upgrades like BitVM2. **DAO reorganization and achieving profitability** The DAO currently spends >$1.5M per year across various guilds, committees, and part- or full-time roles without precisely defined objectives, unclear ROI, and a lack of strategic coordination. The majority of these functions need to be removed or reassigned to tLabs in order to achieve network profitability. A handful of functions will likely remain with the DAO including first-line tech support, financial reporting, and foundation coordination (the exact list of functions retained by the DAO will be informed by the work being done by the DAO's restructuring working group). The Marketing, Integrations, and Treasury Guilds will sunset with most responsibilities taken on by tLabs. The remaining treasury functions will be rolled into the Threshold Council. Governance should decide if the current configuration of the Council is appropriate or if the seats should be expanded. The DAO currently spends 30% ($360K per year) of the T liquidity incentives budget on thUSD, which has generated minimal revenue. Without clear market positioning and demand drivers, this spend should be suspended, pending the steering committee's imminent analysis and recommendation. The largest network expense, staking emissions, will end after the approval of TIP-92, at which point Threshold will be close to (or in) profitability, as shown below (based on a BTC price of $102,451 and a T price of $0.025 as of January 31.). While this P&L excludes tLabs’ budget requests, it does represent a reasonable approximation of the network’s ability to operate profitably if it reduced all non-critical expenses.  **Tokenomics** With the network on sound financial footing, net profits can be used to buyback and burn T tokens as per [TIP-54](https://forum.threshold.network/t/tip-54-tbtc-t-better-together/635), making T a deflationary token. The tight coupling of T to the success of tBTC, will create a virtuous flywheel of TVL growth/bridge velocity → T price → attention → TVL growth/bridge velocity. Additionally, with an increase in TVL to >30K BTC as per [TIP-96](https://forum.threshold.network/t/tip-96-mint-5-of-t-supply-for-tvl-growth-milestones/1009) and the rapid expansion of tBTC to many other chains, bridge velocity and revenue should increase significantly. **What is out of scope for tLabs?** tLabs will have minimal involvement in the existing tBTC v2 implementation, with two notable exceptions: 1. upgrading the signature scheme from threshold ECDSA to Schnorr 2. expanding canonical support for tBTC to additional chains via third-party bridge provider(s) tLabs will otherwise not be involved with support for the current tBTC v2 deployment (i.e. technical support on stalled redemptions, unrevealed deposits, bug bounty submissions, etc.). This requires deep expertise and familiarity with the current implementation, which largely resides within Thesis. **T mint no longer necessary** Considering the likely budget of tLabs, a reorganized DAO cost structure, and the current DAO treasury assets, it’s possible to implement the proposed tLabs’ strategy without the requested mint of ~1.12B T tokens in TIP-98. The DAO currently has ~420M of T (including 90M currently delegated to beta stakers and excluding T in liquidity pools) sitting in Governor Bravo and across various multisigs doing nothing. This is more than enough to cover any tLabs team allocation. The DAO also has ~$8-9M of reserve assets (tBTC, ETH, and stables), representing at least 2-3 years of tLabs runway, in the worst case. We’re grateful for the temp check support but we rescind TIP-98’s mint and financing request; at the current T spot price, the DAO should be a buyer, not a seller. TIP-100 instead requests the provisional approval of the use of the existing treasury assets for the purposes described here and in TIP-98 (with annual tLabs budget requests still subject to DAO approval). With the approval of this TIP, a new era for Threshold begins.

# Introducing tLabs tLabs is a proposed labs company with the single purpose of developing and maintaining tBTC and Threshold Network. This proposal outlines the role of tLabs in the Threshold community, its relationship to the DAO, and the strategy to ensure the long-term growth and success of Threshold DAO. This proposal is motivated by a clear need to address the core challenges facing Threshold and tBTC: 1. Stalled tBTC product and technical development 2. Growth coordination challenges and unclear market position 3. Undercapitalization and runway 4. Limited tokenomic model. It is proposed that tLabs lead protocol, product, business development and marketing functions for tBTC. High-level goals of tLabs include: * Increased tBTC TVL and bridge velocity * Upgraded tBTC core technology * Developed tBTC product and usability. To fund this endeavour, tLabs will conduct a fundraise on behalf of Threshold DAO, with the outcomes of an extended runway for Threshold DAO, funding for tLabs, and the further decentralization of Threshold Network by engaging aligned investors. # The Future of Threshold Threshold Network operates the most secure, most decentralized Bitcoin bridge in the market, and tBTC has the potential to become the canonical BTC token. A recent surge of interest in Bitcoin makes now the time to secure Threshold’s position. How do we do it? Let’s start by understanding where we are now. tBTC development has stalled because of competing priorities in the previous development company. Threshold has enjoyed some success, but its first-mover advantage will decline. tBTC v2 is just the MVP for the true potential of tBTC. tBTC needs a forward-looking product and protocol vision, one that takes the core infrastructure of tBTC and builds with it something more functional, more scalable, and more economically sound. Here is what tLabs plans to scope, design, and implement. ## tBTC Protocol Upgrades ### Tokenomics Recent discussions of $T inflation and possible tokenomic models need alignment within a larger vision for Threshold. tLabs will design a new tokenomic model for the $T token that addresses the concerns of inflation and token value accrual, to be proposed and voted upon by the DAO. ### BitVM2 New developments in Bitcoin core technology have demonstrated that Bitcoin bridges can dramatically improve their trust assumption models. Currently, Threshold’s tBTC operates on an honest majority trust assumption: the bridge is secure if there is an honest majority of wallet signers. BitVM2 enables a 1-of-N trust model, which means that, for the bridge to operate, only one of the operators on any given wallet is required to be a good actor. Implementing tBTC as a BitVM2-style bridge will require significant research, planning, and development but will ensure that tBTC remains the leader in Bitcoin bridging technology. This tech can be implemented on Threshold’s own application-specific chain. ### Threshold App-chain Part of the future vision of Threshold involves moving Threshold Network consensus to Threshold's own chain, built from the current pool of Threshold nodes. Threshold currently relies on Ethereum to coordinate wallet signing and maintain consensus between Threshold nodes. This also means that all tBTC minting and redemption must occur on Ethereum. All “native minting” implementations require routing via Ethereum, which limits functionality, increases (gas) costs, degrades UX, and maintains a reliance on Ethereum and other bridging protocols. By transforming Threshold Network into an app chain, it will be possible to directly integrate with each blockchain where tBTC exists to deliver truly native minting, forming the Bitcoin liquidity and settlement layer between all chains. ## Prioritization Numerous exciting initiatives exist to be explored and implemented, but they require funding and alignment. Upon approval of this proposal from DAO governance, the initial goals of tLabs will be to: * Secure funding for Threshold DAO * Formalize the relationship between Threshold Foundation and tLabs * Propose a 1-year budget for tLabs from the DAO * Share a product and technical roadmap for Threshold and tBTC. # Scope of Work tLabs proposes to take on responsibility for the following aspects on behalf of Threshold Network: * Protocol development * Ensure that Threshold completes Schnorr signing schema upgrades * Upgrade tBTC’s custody model to a 1-of-N honesty assumption via BitVM2 vaults (or similar) * Update tBTC’s roadmap based on developments or changes in Bitcoin core tech (e.g. OP_CAT, OP_CTV) * Manage the development of a Threshold app-chain * Research, propose, and develop T tokenomic improvements. * Product development * Develop and maintain the Threshold DApp * Develop tBTC SDK * Continue tBTC interchain deployments. * Marketing * Create and define a clear product marketing strategy for tBTC * Liaise with a leading marketing agency to handle marketing operations for tBTC. * Threshold growth * Liaise with DeFi protocols for tBTC integrations * Collaborate with new L1 & L2 protocols to deploy tBTC * Maintain tBTC and T token infrastructure listings (e.g. DefiLlama). tLabs will not perform or be responsible for any operational aspects of Threshold Network, such as running nodes, hosting DApps, managing DAO treasury, or paying DAO expenses. Note: the scope above is broad and subject to resource constraints and prioritization. ## Why do this as tLabs and not the DAO? Although some of the scope is covered by the DAO today, tLabs proposes to move these functions into a more efficient and streamlined structure that aligns with a long-term product roadmap. Threshold Network was founded on the principles of decentralization, and that will never change. However, the DAO has faced several coordination and execution challenges that can be ameliorated by delegating certain tasks and functions to a contracted entity, with the following advantages: * Operational efficiency for the raise * Deep technical expertise * Ownership of long-term product roadmap * Speed of execution * Fiat payments to bank accounts. # Funding We propose to mint ~1.12B $T tokens (a 10% dilution of the current supply) * 7% - ~780M T will be sold to investors and key ecosystem participants to capitalize the DAO, and fund tLabs. * Funds raised will be held by Threshold DAO. * 3% - ~335M T will be granted to tLabs team members to be vested linearly over four years with a one-year cliff. * Distribution will be subject to tLabs meeting key milestones or demonstrating meaningful progress towards these. * Distribution approval will be determined by the Threshold Council. * Milestones will be determined on approval of the proposal once key roadmap items have been identified. * T will be distributed to tLabs team members as long-term alignment incentives to ensure retention of top industry talent and protocol-aligned outcomes. The raise will commence on approval of this proposal. Unused earmarked funds will be managed at the discretion of the DAO. In the event of cessation of the arrangement between tLabs and the DAO, vested tokens will be distributed pro rata upon handover of work completed up to the cessation date. # Alignment and Continuity tLabs and Threshold DAO will be synergistic organizations that both work to grow and maintain Threshold Network. tLabs exists for the sole purpose of developing tBTC and Threshold Network and any intellectual property developed will be assigned to Threshold Foundation and/or released under the appropriate open source license.. tLabs will fulfil the technical, strategic, growth, and marketing requirements of tBTC. Threshold DAO will continue to operate independently and to manage the DAO treasury, grant applications and distributions, and community-led events and initiatives. Threshold DAO will act as the custodian of all raised funds, and it will approve yearly budgets to tLabs based on their requirements. If tLabs fails to perform to the DAO’s expectations, the DAO can elect to end the engagement via an onchain vote. tLabs will present a quarterly activities summary to the DAO to identify key progress that occurred in the previous quarter. tLabs will aim to maintain momentum within the existing growth and product development projects while aligning them with the broader strategy tLabs proposes for Threshold DAO. The DAO will be able to decide on an operational and organizational structure that suits its needs in the light of the functions that tLabs will take responsibility for. # tLabs and Team tLabs will be led by MacLane and Sap. MacLane is the founder of NuCypher (the predecessor network of Threshold) and Sap brings a wealth of experience in tBTC growth, communication, and product design. Importantly, both are deeply familiar with tBTC and have extensive experience coordinating with the DAO to achieve Threshold-aligned outcomes. Team members will be sourced from leading industry talent and from existing DAO roles where suitable. The hiring process will commence on the completion of the raise and be at the discretion of tLabs. MacLane will not accept any compensation from tLabs or Threshold DAO (except in the unlikely event it is required to comply with applicable minimum wage/employment laws). # Close This proposal introduces a number of new ideas and concepts, so please share your thoughts. The opportunity that presents itself to the Threshold community is incredibly exciting, but timing is of the essence. Threshold is in a crucial market moment that, if captured, will secure tBTC’s position as the Bitcoin-standard of DeFi assets.

**Bootstrap Agreement v3** **TL;DR:** This proposal seeks to extend the bootstrap agreement for up to one year. **Background:** tBTC launched with three bootstrap providers: Boar, P2P, and Staked as described in [TIP-045 – Bootstrap Proposal v2](https://forum.threshold.network/t/tip-045-bootstrap-node-proposal-v2/492). The DAO then extended the original term by [TIP-074](https://forum.threshold.network/t/tip-074-bootstrap-operator-agreement-extension/800) in January 2024. **Purpose:** to authorize the expenditure of DAO funds to maintain bootstrap node agreements with aforementioned providers. **Written by:** @Vict0r **DAO sponsors:** @JohnPackel **Discussion:** Bootstrap nodes serve several vital functions but primarily support peer-to-peer node discovery and provide electrum connectivity for the network. Detailed explanations of hardware requirements are listed in each of the prior TIPs, and not repeated for brevity, and are incorporated by reference. A recent proposal [TIP-092](https://forum.threshold.network/t/tip-092-make-t-great-again-part-1-eliminate-inflation/984) proposed ending inflation, and acknowledged that the bootstrap nodes are a significant expense costing the DAO $360K annually. Considerable thought has gone into exploring options to reduce or eliminate this expense by various means. However, since no decision has been reached in one direction or another, I have come to the conclusion that extending the existing proposal is the best course forward for the time being to ensure stability and continuity. All three of the original bootstrap providers agreed to continue to provide this service to Threshold Network under the same terms and cost to the DAO. **Proposal:** Extend the terms of TIP-045/TIP-074 for 6 months, starting February 2025 until July 2025, at which point the DAO may extend the agreement up to two times by an additional 3 months each. Each provider, Boar, P2P, and Staked, will continue to receive $10,000 per month in T.