Threshold Signature Scheme

Decentralized TSS Vaults

Helios secures Bitcoin deposits with a Threshold-Signature Scheme (TSS) implemented on the MIDL layer. Vault keys are split among an on-chain quorum of validators; no single party ever controls a complete key. This design removes the single-custodian risk common in traditional solutions while retaining Bitcoin’s native settlement guarantees.

Withdrawal Process - Three Mandatory Checks

• User Intent: The depositor signs a BIP-322 message that proves ownership of the UTXO.

• Validator Co-Signature: A super-majority of validators jointly generate the TSS signature (t-of-N).

• Protocol Verification: Helios smart contracts confirm the action aligns with protocol rules (e.g., loan repayment, liquidation) before broadcasting the transaction. Only when all three conditions are met does the vault release funds, ensuring continuous self-custody for the depositor.

Additional Security Safeguards - Slashing & Watchtowers

• Economic Penalties: Validators stake BTC that is slashed for invalid signatures or censorship.

• Fraud-Proof Window: Each outbound spend is subject to a short challenge period, during which independent watchtowers can submit fraud proofs. A malicious validator majority cannot move assets without the depositor’s signature, and off-path signatures are rejected because the TSS key functions only through the custody module.

Resilience & Recovery

If validator liveness drops below safe thresholds, the protocol supports on-chain validator rotation and time-locked recovery scripts, enabling depositors to migrate funds without disruption.

Institutional Alignment - Seamless, Revenue-Positive Integration

• Plug-and-Play Stack: Helios relies on the TSS primitives already deployed by many enterprise custody platforms.

• Policy-Engine Continuity: Existing role-based approvals, velocity limits, and whitelists map one-for-one to Helios contract calls, allowing operations teams to integrate the product without rewriting internal control matrices.

• New Yield Product: A simple “Bitcoin-native earn” toggle can be added to current dashboards, giving clients access to DeFi returns while their BTC never leaves the base layer—enabling the provider to charge management or performance fees.

• Compliance by Design: Real-time Merkle solvency proofs, Travel-Rule metadata feeds, and automated audit logs plug into existing reporting pipelines and preserve SOC 2 / ISO accreditation.

• Risk Ring-Fenced: Slashable validator stakes, mandatory user co-signatures, and immutable contract guardrails eliminate rehypothecation risk and satisfy fiduciary capital-protection mandates.

• Competitive Differentiation: Offering native BTC yield—without bridges or wrapped assets— that allows 1-block withdrawal instead of long staking period broadens the custody provider’s product suite and positions it ahead of peers still limited to wrapped-token DeFi.