The cryptocurrency security firm BitGo is introducing Wrapped Bitcoin (WBTC), an ERC20 token aimed at launching Bitcoin-backed derivatives into the Ethereum ecosystem. Traders that deposit Bitcoin on BitGo will generate WBTC tokens (at a 1:1 ratio) which can then be used on the Ethereum network.
WBTC is a collaboration between BitGo, the Republic Network, an institutional trading platform, and the Kyber Network,a decentralized liquidity pool. Several well-known cryptocurrency companies are lending their support to WBTC, including Blockfolio, MakerDAO, and AirSwap.
The WBTC project came about as a way to help traders become better acquainted with both blockchains. Bitcoin traders seeking to get involved with smart contracts can more easily do so by redeeming their WBTC for Ethereum. Likewise, Ethereum holders will be able to enjoy the greater liquidity that Bitcoin offers.
Loi Luu, Kyber Network CEO, noted WBTC’s benefit to both networks:
“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,” he went on to say. “The usage of Bitcoin will be expanded by having more decentralized use cases, such as exchange, loans, token payments.”
Other WBTC Uses
Expected to be made available in January 2019, WBTC will allow for a variety of use cases. Those already being considered include serving up smart contracts, gaining access to DApps as collateral for stable coins, facilitating lending and payments, and as a way to introduce Bitcoin trading on decentralized exchanges.
Available Through Atomic Swaps
Both Kyber and Republic intend to pre-mint WBTC tokens from their bitcoin reserves. They will then make them available to traders interested in atomic swaps – cross-chain transactions viewed as an emerging alternative to centralized exchanges.
Republic Protocol CEO Taiyang Zhang notes that “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.”
Finally, WBTC tokens will also put to rest any concerns that it can cover all trades. BitGo will provide that verifiable proof-of-reserves exist for both (ETH & BTC) blockchains.
Just as banknotes came about as a means to represent gold, WBTC aims to replicate Bitcoin’s utility for Ethereum users. As BitGo CT Bernard Chan observes, WBTC offers “the stability of bitcoin and the flexibility of