Building of Withdrawal Transactions

Before the TON Teleport BTC system starts operating, a critical preparatory stage occurs—the DKG process, which involves all active validators. This process is repeated with each change of validators and serves to create a common public key used for signing withdrawal transactions. Details of this process are described in the technical specification and are crucial for understanding how the security and reliability of validators are ensured when signing transactions.

During the system’s operation, users perform Peg-in transactions, the results of which are the recording of available UTXOs (Unspent Transaction Outputs) in the TON blockchain. These UTXOs represent registered incoming transactions whose funds have not yet been spent or converted back into BTC.

When smart contracts receive a command to burn tokens, a special withdrawal contract is automatically activated. This contract aggregates all available UTXOs collecting incoming funds from all users who have performed Peg-ins, and forms two outputs:

1. The first output is directed to the user who initiated the withdrawal.

2. The second output is returned to the system’s ”bank,” allowing the accu- mulation and control of the balances of unspent funds in a single address.

After collecting all necessary data and forming the outputs, the transaction signing process begins using the FROST protocol. This process includes several steps—from commitment to the aggregation of signatures. Upon completion of this process, a ready-to-send Bitcoin transaction is formed in the smart contract.

The final transaction, containing all necessary signatures and requiring no further modifications, can be sent to the Bitcoin network by any participant. This ensures transparency and openness of the process, as the transaction is already fully formed and verified, eliminating the possibility of its alteration or manipulation.