In a major development for the industry, BitGo, Kyber Network and Republic Protocol have today announced WBTC (Wrapped Bitcoin) – a fully-backed Bitcoin ERC20 token.
WBTC seeks to act as a bridge between the two largest cryptocurrencies, bringing liquidity from Bitcoin to Ethereum, while opening the door for a new wave of applications made possible by a fully-backed Bitcoin token represented on the Ethereum network.
WBTC will launch on Ethereum in January 2019 and lead partners in the project Kyber and Republic Protocol will pre-mint WBTC tokens, providing the initial bitcoin liquidity from their own inventories.
The new token promises to be a significant milestone for the space, as it will in effect allow traders to trade bitcoin against other crypto assets on Ethereum-based decentralized exchanges (DEXs).
CEO and Co-founder of Kyber Network explained:
Applications on Ethereum such as decentralized exchanges and financial protocols will all be able to use Bitcoin seamlessly, creating bitcoin trading pairs which have been impossible until now. At the same time, the usage of Bitcoin will be expanded by having more decentralized use cases, such as exchange, loans, token payments.
How it Works
‘Minters’ of WBTC such as Kyber Network and Republic Protocol have to send bitcoin to the custodian BitGo. Bitcoin is returned to the ‘Minters’ when the token is redeemed at which point the WBTC is burned. Both the minting and burning require the approval of the custodians and both stages are publicly verifiable on the Bitcoin and Ethereum blockchains.
From its inception, WBTC had support from over 15 influential projects such as MakerDAO, Airswap, Gnosis, IDEX and other decentralised exchanges and financial products. BitGo has recently been granted a regulated custodian making them a natural fit to be the custodian of the Bitcoin reserves for WBTC.
The press release however, indicates that other custodians and minters are welcome to join the initiative. A Decentralized Autonomous Organization (DAO) made up of numerous projects in the industry will vote and decide on the addition of minters, custodians and DAO members.
Transparency
BitGo CTO Benedict Chan emphasized to CryptoGlobe that transparency has been a focus for the WBTC project. Because WBTC only deals with Bitcoin and Ethereum, users can verify the proof-of-reserves held in BTC by the custodian BitGo.
This aspect is particularly topical as recent events have borne out the fact that fiat stablecoins can’t seem to provide real-time verifiable audits. Tether (USDT) recently lost its peg in dramatic fashion, falling to a low of $0.8 earlier this month, as traders lost faith in the claim that they had a full reserve of dollars.
The new project also opens up the possibility for wider uses cases – a point Rune Christensen, CEO and co-founder of MakerDAO, stressed:
Bridging Bitcoin to Ethereum with WBTC unlocks a whole universe of utility for bitcoin and gives Ethereum's users direct access to the world's largest digital asset. One use case we're particularly excited for is the possibility of using bitcoin as collateral for Dai.
If the model is successful the press release indicated that this initiative might be extended to bring other cryptoassets to Ethereum. At press time the Kyber Network Crystal token is up 13.8% in the last 24 hours:
KyberNetworkCryptal (KNC) is up 13.8% over the past 24 hours
