Consortium Design
Unique to Lombard is its Security Consortium, comprised of independent organizations which validate and sign critical operations. These operations include the staking, and unstaking of BTC into Babylon, and the minting, burning, and bridging of LBTC across supported blockchains. The Security Consortium is unique in the blockchain space, and ensures every transaction on the Lombard protocol is validated transparently by multiple independent parties.
Security Consortium in Lombard's Architecture
The Security Consortium is a decentralized state machine for sharing ownership and managing assets among various members. The Consortium state machine is deployed on a trusted network of nodes that uses the Raft algorithm to reach consensus. The Consortium performs the following actions to handle these processes:
Create a New Deposit Address:
CubeSigner-Managed BTC Address: When a staker requests to make a deposit, the Consortium creates a new BTC key—and address—managed by CubeSigner in secure hardware.
Verify Deposits and Produce Signed Data:
Check Deposit Transaction Existence: Confirm that the deposit transaction exists on the Bitcoin blockchain.
Confirm Transaction: Ensure that the transaction has been confirmed with the required number of confirmations.
Validate BTC Amount: Verify that the transaction includes the BTC amount.
Point to Deposit Address: Ensure that the transaction points to the correct deposit address.
Produce Signed Data: Once the deposit is verified, generate the signed data that points to the selected blockchain where the user will claim the LBTC.
Stake and Unstake BTC:
Select Providers: The Consortium selects appropriate finality providers for staking.
Stake BTC: Stake BTC to the finality providers.
Unstake BTC: Unstake BTC from the finality providers.
Pay out Unstaked BTC:
Payout Process: Once BTC is unstaked, the Consortium handles the payout of the unstaked BTC back to the user.
Requirements to be a Consortium Member
Currently, becoming a Consortium member entails the following steps:
New Member Approval: The existing Consortium members approve adding a new member (offline).
Infrastructure Rollout: The approved Consortium member rolls out the required infrastructure (launches a Bitcoin node or uses a public RPC, and deploys the Consortium node). Afterward, the new member exchanges their public keys with existing Consortium members.
Threshold Key Issuance: The Consortium, being a decentralized network, issues a new threshold key (a wallet to sign notarizations) and distributes it among its members. The threshold key is distributed in such a way that 2/3 of the members would suffice for data notarization. To eliminate a single point of failure and increase security, the consensus between nodes in the Consortium is achieved by generating a valid signature through a threshold signing algorithm.
Smart Contracts Update: The Lombard-managed multisig wallet updates the threshold key in Smart Contracts to validate the new signature.
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