U.S-based crypto wallet and blockchain security company BitGo has partnered with Kyber and Republic Protocol to launch an Ethereum-based token that is backed by actual Bitcoins on a one-to-one basis.
Wrapped Bitcoin (WBTC) token as an ERC20 token
The announcement was made via a blog post by BitGo on Friday, October 26. The Wrapped Bitcoin (WBTC token, according to the post, is a community that is focused on an initiative to develop Bitcoin ERC20 token on the Ethereum platform.
The token will be launched early next year and is viewed as a very big step in cross-chain infrastructure and a massive achievement for the entire crypto space.
BitGo further added that the token will have a lot of benefits as it would provide users with options to be used on decentralized exchanges.
The token would also be used as collateral for lending or for stablecoins, for making payments and smart contracts transactions within the Ethereum network.
In addition to this, BitGo will provide custody of the token and will also tokenize it. WBTC would be minted with the approval from their community members and would serve as a way to make digital currencies more usable for businesses.
BitGo also listed some other partners which include MakerDAO, IDEX, Compound, DDEX, Hydro Protocol, Set Protocol, and many others.
Increase in transparency to digital currencies
BitGo, in its post, stated that for the first time, Bitcoin will be tokenized and there will be a full proof of reserve. To ensure transparency, each Bitcoin will be accounted for on the dashboard which would display user addresses and balances.
Users can also verify the Bitcoin in reserve via the blockchain explorer such as Etherscan. They believe that this transparency will bring trust to the crypto space which is very critical for the continued growth of the ecosystem.
Kyber and Republic Protocol will be allowed to pre-mint the WBTC token. Loi Luu, CEO, and Co-Founder of Kyber Network stated that dApps on the Ethereum network would be able to make use of Bitcoin seamlessly.
Decentralized exchanges and financial protocols will be able to create Bitcoin trading pairs, something that has not been possible up until now.
He added that the creation of WBTC will also see an increase in the use of Bitcoin via loans, token payments, and similar transactions.
The minted tokens will be distributed by the merchants after they are released by the custodian, BitGo. According to the post, a regular audit of both the BTC and WBTC in circulation will be conducted by Decentralized Autonomous Organization (DAO).
DOA will also be in charge of the appointment of other custodians, merchants and will propose further improvements to WBTC. BitGo encouraged builders who believe in this tokenization and the use of WBTC to join them in their effort.
Bringing BTC trading pairs to decentralized exchanges
Currently, decentralized exchanges only work with ERC20 tokens due to their smart contract technology. Therefore, Bitcoin or fiat currencies cannot be exchanged on decentralized exchanges.
WBTC would solve this problem since it would be an ERC20 token pegged on a 1:1 basis with Bitcoin, bringing Bitcoin’s liquidity and popularity straight to decentralized exchanges and other Ethereum-based smart contract applications.