In January, a new token will be launched on the ethereum blockchain, one that will be backed one-for-one by the Bitcoin, the largest cryptocurrency in the world.
Decentralized exchange startups such as Kyber Network and Republic Protocol and BitGo (the crypto custody company), were companies behind the initiative. In addition, a number of Ethereum-based projects have also said that, once the token is released they will support its adoption.
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Focused at replicating bitcoin’s utility in a way that’s interoperable with ethereum, the “wrapped bitcoin” or WBTC token will facilitate any decentralized application running on the blockchain.
Benedict Chan (BitGo CTO), referring to it as “the best of both worlds,” characterized WBTC as possessing both “the stability of bitcoin and the flexibility of ethereum.” Chan told CoinDesk: “It’s very similar in some ways to how people created banknotes that represented a pound of gold. A pound of gold was heavier and it took longer to trade. You could use a note which represented a pound of gold and it was well accepted.”
Talking of WBTC, BitGo is the major custodian responsible for holding a reserve of bitcoins to back all minted WBTC tokens in circulation on the ethereum blockchain. WBTC tokens, unlike other stablecoins which are pegged to fiat currencies will feature a full proof-of-reserves verifiable directly on the two blockchains. Chan said: “The beauty of that is all we have to do is put up a webpage and show all the addresses that have the bitcoins … and at the same time, people will be able to check how many WBTC are in existence just by looking … on the ethereum blockchain.”
Also, there are registered “merchants” responsible for disseminating and redeeming WBTC tokens to all users. Currently listed to be the Republic Protocol and Kyber Network, transfers of WBTC for bitcoin and vice versa are completed by merchants in the form of atomic swaps. As background, a two-way cryptocurrency trade is facilitated by atomic swaps across different blockchain platforms without any risk of one party not keeping to their agreement.
The initiative by BitGo, Republic Protocol, and Kyber Network has been perceived to be an effort driven by the community. With a view to expand services to the increasing number of WBTC users, the goal is to eventually onboard several custodians and merchants in the long run.
Due to this reason, Loi Luu (CEO of Kyber Network) stressed that the WBTC token official launch scheduled to take place in January next year, will also feature the activation of a decentralized autonomous organization (DAO) tasked with overseeing the ongoing development of the project.
Luu told CoinDesk: “One of the main reasons why many projects support this initiative is because there’s a DAO that’s going to govern the whole project including making major upgrades, adding more features, adding more merchants, even adding new custodians as well.”
Expected to be publicized on GitHub at a later date, Luu affirmed that a key component to the success of the WBTC token would be having a decentralized leadership. Luu said: “I think it couldn’t be that successful if the initiative is owned by BitGo or by Kyber [Network] or Republic [Protocol] alone.”
