Wrapped Bitcoin (WBTC) an Ethereum-based Token Launches on the Ethereum Network

31. Jan 2019 Posted by Akolkar B on News

On Thursday, January 31st, a Bitcoin-backed token dubbed as “Wrapped Bitcoin (WBTC)” was launched on the Ethereum blockchain network. So without confusing it with its name, even though the token is backed by Bitcoin, it is basically a ERC20 token.

The WBTC token is a joint initiative of Kyber Network liquidity protocol, BitGo, and others. The new WBTC tokens aims to bring between liquidity between the two decentralized blockchain networks while giving a push to decentralized applications.

The “Wrapped Bitcoin” is the first ERC20 to be backed by Bitcoin in 1:1 ratio. The institutions backing the WBTC token believe that this could lay the foundation of a multi-institutional framework  for the tokenization of any asset.

A press release from the WBTC network states that “By bringing Bitcoin’s liquidity to Ethereum, WBTC also makes it possible for traders to use Bitcoin value for token trades on decentralized exchanges.”

A statement issued by the firm notes that Wrapped Bitcoin will provide users with a “wide variety of new decentralized use cases including on decentralized exchanges (DEXs), as collateral for stablecoins or lending, for payments and flexible smart contracts within the Ethereum ecosystem”.

“WBTC will allow the Ethereum network to be leveraged to enable new applications and use cases for bitcoin — WBTC standardizes bitcoin to the ERC20 format, so dapps such as Compound, Dharma, Dydx, Gnosis, Maker, Set protocol and more can leverage bitcoin for decentralized lending, margin trading, and derivative markets,” explain the creators of WBTC.

“Further compelling new applications and use cases will be identified, explored and implemented as the ecosystem continues to grow and actively innovate.”

Also, the WBTC smart contracts shall be audited by third-party firms. This community-backed is also centralized to a certain degree. BitGo will hold all the keys to mint tokens and the WBTC token uses proof of reserves making it quite similar to stablecoin projects. 

Initially, eight merchants shall be allowed to establish seamless conversions between WBTC and BTC. However, the customers need to follow a mandatory Know Your Customer (KYC) process to obtain WBTC through these merchants.

The WBTC representatives added: “Wallet providers and exchanges will now be able to reduce overheads with the ability to support multiple currencies while maintaining only the one Ethereum node”.