I'm still struggling to understand the security of this wrapping model.
You touched on it briefly that it relies on BTC collateral.
Their overall reliability will determine the level of collateralization they need to supply.
Eh? What does that mean? Who determines 'reliability'?
Where is the Bitcoin stored and who has access to it?
I guess I just need to read the original post you linked to.
Reliability doesn't directly determine collateralization. Reliability might be used to determine additional rewards or slightly reduce requirements by a very small margin. Reliability would be measured by the speed at which a wrapping provider unwraps bitcoin. If we can assume 2 hours is a maximum for good UX, then anything longer than 2 hours could create a negative reputation hit for taking too long (or never) unwrapping a transaction. This could be measured over a long period of time and count total volume to determine a score for a specific node. All of this can be counted via smart contract logic.
The bitcoin is stored on wrapping providers using collateralization and chain proofs for security. Collateralization is used as punishment for behavior, while the chain proofs allow a smart contract to verify Bitcoin activity trustlessly.
its confusing and sounds for me like "nobody takes responsibility"
I think @vaultec is going to need to explain this in due course. I sort of see how this will work but the impact of volatility on the collateral amount isn't clear to me either.