Bitcoin-Backed Token Coming To Ethereum

The “wrapped bitcoin” token was developed by BitGo, Kyber, and Republic Protocol.

consortium of cryptocurrency companies are bringing a bitcoin-backed ERC20 token to the Ethereum platform in an effort to “bridge Bitcoin liquidity and the decentralized ecosystem on Ethereum, enhancing all decentralized applications,” according to an October 25 press release.

The development of the “wrapped bitcoin” token (WBTC) is the culmination of a joint effort between cryptocurrency investment services provider BitGo, decentralized dark pool exchange Republic Protocol, and on-chain liquidity protocol Kyber.

According to the companies, the WBTC token will be fully backed 1:1 by bitcoin and verifiable on the Ethereum blockchain. By bringing the WBTC token to the Ethereum platform, the consortium hopes to allow for the seamless use of bitcoin in all Ethereum applications such as “decentralized exchanges and financial protocols.” It also creates additional trading pairs in bitcoin.

To create liquidity in the WBTC token, Kyber and Republic Protocol will pre-mint WBTC tokens from their own bitcoin inventory and make them available for cross-chain transactions known as atomic swaps.

Taiyang Zhang, CEO of Republic Protocol, was expectedly bullish on the tech: “The addition of atomic swap technology to the WBTC initiative will allow users to deposit and withdraw BTC/WBTC securely and with confidence, which will assist in enabling WBTC adoption to reach the masses.”

BitGo will reportedly be the custodian of the pre-minted WBTC tokens, and can only mint additional WBTC tokens with approval from merchants.

The consortium hopes to provide complete transparency of the WBTC token by providing on-chain verification of burned WBTC tokens once they are redeemed for bitcoin tokens as well as showing a proof of reserve on the WBTC dashboard; this would demonstrate that BitGo actually has the same amount of bitcoin and WBTC tokens in storage at all times.

Moreover, a “Decentralized Autonomous Organization (DAO) comprised of reputable projects in the cryptocurrency space” will be responsible for conducting public audits as well as for voting on token improvements and the removal of members.

The WBTC token is slated for a January 2019 launch; DAO membership should also be ready by then. The consortium will publish specifications on Github/Gitter before the launch.

“We are really excited to tokenize the most widely accepted cryptocurrency on Ethereum,” said Benedict Chan, CTO of BitGo, “I think this is a great application of the flexibility and power of blockchains, and it’ll drive greater interoperability and utility throughout the entire ecosystem.”