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Matt Bell was on the staff at Tendermint (All in Bits) in the early days of 2017 when Cosmos was just a talking point between co-founders Jae Kwon and Ethan Buchman.
One of his early jobs as a software engineer was working out how best to accept bitcoin for the ATOM token sale. The June 2017 fundraiser, held during the heady days of a bull market, easily hit its hard cap of $17 million in bitcoin at a time when it was changing hands for around $2,500.
Bell left at the end of 2018 and founded Nomic-developer Turbofish, with the goal of bringing bitcoin to Cosmos directly.
After nearly five years, Nomic is now locking mainnet bitcoin and minting nBTC, an IBC-transferrable token, available for Cosmos chains.
Tendermint, which later rebranded to Ignite, suffered considerable staff turnover, and its role in the ecosystem’s development diminished.
Bell sees the sometimes chaotic development and governance environment as part of the “culture of cosmos.”
“We don’t all have to be, like, this one cohesive group — like Solana — where it’s like essentially one company that controls everything,” he told Blockworks, adding, “we can just spin off into different organizations and that makes things a lot more decentralized.”
Nomic has a bridge fee of 1% and an initial max capacity of 21 bitcoins (BTC) (about $725,000 at current prices) while the protocol undergoes audits expected to be completed in January.
Here’s more from Blockworks’ interview with Bell:
Blockworks: Do you see bitcoin competing with ATOM in the role of a collateral asset of Cosmos DeFi? We’ve also seen initiatives to bring wrapped staked ether to Cosmos, which has suffered from low liquidity.
Matt Bell: I think that’s one way to look at it, where every token is competing for value and holders, but if you look at bitcoin and ether…they have so many people who believe in them so deeply and it’s almost this religious belief to want to hold it. And that’s sort of what gives it so much value.
There’s $500 billion worth of bitcoin and I don’t think it takes away from ATOM at all to bring other value that already exists. It would increase the value of ATOM, I think [to have] all these other tokens in the ecosystem.
Blockworks: How do you persuade bitcoin holders to deploy their precious BTC on Cosmos?
Matt Bell: There’s such a wide spectrum of bitcoin holders. There’s definitely the loud extreme people who hate all other tokens and they’re very extreme about their cold wallets and they’ll just never take it out and like — never even spend it, really.
But I think there’s so many people who hold bitcoin — it’s such a big part of their portfolio — and they want to put it to work and earn yield in some way.
Even Bitcoin people who hate Ethereum and stuff — there’s been all these platforms like BlockFi where there were many billions of dollars earning yields on bitcoin. Except, of course, that was centralized, and they were holding money on FTX and they sort of got wiped out.
But clearly, there are bitcoin holders who want to take some amount of risk and earn on their bitcoin.
Blockworks: Nomic has its own validator set that’s somehow securing the bridge from the Bitcoin network that’s coming into nBTC, right?
Matt Bell: Right. And that’s something we’ve put thought into for many years and I think all the other designs for bridges have had capital efficiency issues. Nomic goes beyond that because we use some really innovative features; it’s very tightly integrated with Bitcoin as opposed to other bridges [that] are sort of just designed to be easy to build.
We’ve spent years working on this, and years going deep into every part of Bitcoin we can. So for instance, we make use of Taproot…that helps the bridge essentially go beyond being a simply over collateralized security model.
Blockworks: So you don’t necessarily need validators’ value at stake to match the amount of bitcoin value bridged?
Matt Bell: Yeah, there’s some different mechanisms.One of the big tight integrations with Bitcoin that adds security here is our emergency dispersal mechanism. This is essentially where the funds in the bridge — its defaults, if something went wrong, even if the Nomic network disappeared — the default is the funds go back to the nBTC holders on the Bitcoin blockchain.
So if you’re holding funds in the bridge, it’s not like it’s moved somewhere else, but it’s more like it’s there temporarily.
And so because of that, there’s often a trade-off between liveness and security.
So, if you require more of the validators to sign something, then that means fewer validators can trigger the bridge getting stuck. So if you needed, for instance, 99% of the validators to sign something, then if somebody had 2% vote power, they could veto the whole process essentially.
And so that’s why it’s typical in bridges for things to be usually like a two-thirds threshold or something like that because it would be difficult for there to be like a third of the network stopping the process.
But in the case of Nomic since, the default is for Bitcoin to come back to the users, we can raise that threshold. So we use 90% — only 10% has to be honestly signing.
Blockworks: Who’s your target market?
Matt Bell: We’re focusing on being the on ramp. So much bitcoin is just out there sitting in wallets not being used for anything.
And if you wanted to use bitcoin in some DeFi protocol, then you’d have to trade it for something else on a centralized exchange and then go through multiple steps [and] in the end you get [wrapped bitcoin] (WBTC) or something like that where it’s custodially held. And so it’s not really Bitcoin in that case.
With Nomic, it’s essentially like you can just send bitcoin to an address and then behind the scenes, all the bridging happens and then now you have this decentralized bitcoin token that you can use in DeFi.
We’re solving the onboarding into DeFi with Bitcoin.
Blockworks: So you would think there would be no advantage to holding WBTC in Cosmos compared to holding nBTC?
Matt Bell: Yes, it’s not only a better asset because there’s less risk, but it’s also easier to use because instead of going through all those steps to get that WBTC, like they just go from the Bitcoin and their Bitcoin wallet and deposit it, and then now they have nBTC.
Blockworks: And similarly, any app that wants to use bitcoin of whatever variety in Cosmos, why would they bother to offer WBTC, if there’s no value add by having BitGo in the loop as a centralized custodian of bitcoin?
Matt Bell: Right, it’s just that this has been something that no one has solved yet. So that’s been the easiest way to do it.
We have been talking to different DeFi protocols and different partners who want this transition to happen, [who] want people to be holding nBTC instead of WBTC. We have some plans thinking about how to sort of help that happen, just people who have positions in WBTC and getting them to transition out.
Blockworks: With the expansion of IBC potentially to Ethereum, are you looking towards nBTC having a similar role to WBTC on, say, Arbitrum?
Matt Bell: Yeah, definitely. I think that’s a huge market.
We’ve even put MetaMask support in Nomic, which isn’t true for most of Cosmos. A user could just show up with a MetaMask wallet and then deposit Bitcoin.
Blockworks: What would be the bridging solution to bring the nBTC over to Ethereum?
Matt Bell: So we’ve looked and there’s some options, but the fact that we’ve gone this deep on bridging and we have a lot of thoughts and a lot of code built up — we kind of want to apply the model of how we’re doing things to Ethereum as well.
Our team Turbofish, we’re just the core contributors to Nomic. We’ve now invested a lot of effort into our own tools.
So we don’t use the Cosmos SDK even — we’ve built our own stack from scratch, unlike other Cosmos chains.
Nomic we’ve been able to do with a really lean team — like only three engineers doing all of this. And so I think fundamentally that makes it a lot simpler and easy to understand and quicker to execute on.
Blockworks: Does that have any downstream effects in terms of plugging into IBC?
Matt Bell: [IBC] was designed for any chain to talk to any chain. We have been able to implement IBC and Nomic does work with any other IBC chain.
I think Cosmos is very decentralized because everyone sort of has their opinions and wants it their way, but we can still have IBC and have the same protocols and collaborate.
And so it’s this really interesting mix of independence and collaboration in Cosmos.
This interview has been edited for brevity and clarity.