Peg-out (tgBTC Withdraw)

Peg-out is the process that enables users to convert tgBTC on the TON blockchain back into BTC on the Bitcoin blockchain. This process involves burning tgBTC in TON and issuing an equivalent amount of BTC to the user’s Bitcoin network address. The diagram visually illustrates the sequential stages of this process, as described below.

Diagram 2 - Peg-out (tgBTC Withdraw)

Simple user scenario:

1. Initiation of Peg-out: The user starts the Peg-out process by selecting the amount of tgBTC they wish to convert back into BTC and initiating the token burn process on the TON blockchain.

2. Token Burning: tgBTC are sent to a specialized smart contract in TON, which performs their burning. This step is critical as it confirms the user’s intention to withdraw funds and prevents the possibility of double-spending the same tokens

3. Operation Confirmation: After the tokens are burned, the system automatically begins the process of creating a Bitcoin transaction, which will send an equivalent amount of BTC to the user’s address. This address was previously specified by the user at the initiation of the burning.

4. Building of the Bitcoin Transaction: A specialized smart contract in TON, responsible for the Peg-out, collects all necessary data to form the Bitcoin transaction, including inputs (which correspond to previously locked BTC) and outputs (which indicate the user’s address).

5. Signing and Sending the Transaction: The transaction is signed with an aggregated signature using FROST (Flexible Round-Optimized Schnorr Threshold) and DKG (Distributed Key Generation) processes formed by TON blockchain validators. This ensures a high level of security, cost-efficiency, and guarantees that only authorized operations can be executed.

6. Confirmation of the Transaction in the Bitcoin Network: The formed transaction is sent to the Bitcoin network where it is confirmed by miners and the user receives BTC at their address.

In the context of the previously declared trustless declaration, the Peg-out process in TON Teleport BTC supports the principles of a trustless system where the security of operations does not depend on external or centralized parties.

TON network validators, who manage the Peg-out process, ensure that the security and execution of transactions are fully controlled by blockchain algorithms. This removes the need for additional guarantees or third-party intervention, which is foundational to the trustless approach. Validators have an incentive to maintain transparency and reliability, as any undermining of trust or security would negatively impact the entire TON network, making abuse or censorship impossible without severe consequences for the entire blockchain. This structure confirms that the system remains trustless, as its security is determined only by the sources managing the blockchains with which it interacts.