Step 1: BT Toxin - Bacillus thuringiensis ($Bt$) produces protein crystals during a specific phase of their growth which contain a toxic insecticidal protein.
Step 2: Mode of Action - When a caterpillar ingests the toxin, it is converted into an active form due to the alkaline $pH$ of the insect's gut.
Step 3: Effect - The activated toxin binds to the surface of midgut epithelial cells and creates pores, causing cell swelling and lysis, which eventually leads to the death of the insect. This technology is used to create $Bt$-Cotton.