How does incognito secure/custody funds? - (differences between BTC & ETH/ERC20 leading to extreme fees)

(Background: So unshielding fees were implemented. I thought this was good until I saw such excessive fees being charged. Someone challenged me saying they were not excessive…so I began a journey to understand how incognito works under the surface.)

I never looked into how incognito worked under the surface. I read quite a bit but incognito is a very complex project for me. I had always assumed that users store my funds, and stake PRV as an incentive to be honest. However, in my digging about fees, it seems it handles btc and eth very different, or rather it has to because btc isn’t programmable.

It seems that when shielding eth/etc20 a unique wallet address is generated. Once funds are received, tokens are swept into one single ethereum smart contract holding all the value. Do I understand that correctly?

BTC can not function this way. Instead it’s held by a custodian that had staked at least 150% the value of the btc. Is that right?

Are the custodians the node validators with their 1750 PRV staked? Does that mean that currently each can hold user funds up to say, 0.15 BTC of user funds?

Also, how are monero, BNB, and assets on the other chains stored?

EDIT: I had a lot more to say but it doesn’t matter if I don’t understand the foundation above.


I think we need to scrap the smart contract and institute a bonded custodian model. That way coins can be sent using 21,000 gas units.

Not to berate the point but to withdraw ETH, it wants 64 PRV or approx $81. (This is a prime time because gas fees are less than 100gwi also.)

But I’m just trying to figure out why ETH/ERC20 was designed differently than BTC.

Hey Marco,

Yep, that’s current implementation. And not the final one. We continuously improve and optimize the bridge.

Yep, that’s the Portal V2 implementation with 200% in collaterals. This implementation is not on the user’s side, some more improvements required. We do work on Portal v3 and the full functionality with the ability to become custodians for everyone once it’s deployed on mainnet (approximately Nov-Dec this year)

Nope, to be custodian requires to lock funds on a smart-contract. The current implementation does not allow to stake on Node and be custodian with the same coins.

A custodian set up.

We are aware of it. Work on optimizing and improving unshielding fee.

I think it’s a good idea for content creators. To make a simple explanation of the difference between the two implementations.
CC @elena @fonz @InvestForFamily

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Thank you @andrey for answering many of my questions. Good to know incognito is constantly improving. :slight_smile: So would it be safe to say that all non-ETH funds are held in custody by the team right now since no one else can be a custodian yet?

And to be a custodian, you mentioned that it requires their funds locked up in a smart contract. Does that mean that incognito smart contract supports smart contracts? Or where exactly would the PRV for the custodian be locked? (I’m assuming it is PRV that will be collateral but maybe I’m wrong).

It’s normal for things to be very centralized at the beginning of projects but I think people in defi have a false sense of security. I mean even the eth smart contract was completely replaced using admin keys which means the smart contract is custodial too. I trust you guys otherwise I wouldn’t be here. I’m trying to learn and hopefully help more and more as I learn the project. The community here is strong.

Thanks for your answers thus far and hopefully you can answer a few follow up questions too if you have time. Thanks!!