Wrapped Bitcoin (WBTC), a new crypto token backed 1:1 by Bitcoin has launched, according to an announcement by BitGo published on January 31.
The WBTC token was first announced in October 2018 by a group of firms including BitGo, Kyber Network, and Ren protocol. The aim was to bring Bitcoin’s liquidity to Ethereum’s decentralized ecosystem,
As noted, Wrapped Bitcoin is an ERC-20 token backed 1:1 by bitcoin much like those stable coins that are pegged 1:1 to a fiat currency. The token is designed to represent bitcoin’s value as well as offer users all the functionality of a regular ERC-20 token.
According to the WBTC network, Wrapped Bitcoin brings the possibility of having new applications and other potential Bitcoin use cases to the Ethereum network.
Among the many use cases is the addition of bitcoin’s liquidity to ethereum, collateralize decentralized crypto lending and for traders to use BTC value for token trades on decentralized (DEX) exchanges.
For decentralized exchanges, the WBTC token enables them to support trading between bitcoin pairs, opening them up to that liquidity that bitcoin provides, said BitGo’s CTO Ben Chan.
BitGo’s role in the WBTC launch continues as the trading gets underway. From the look of it, BitGo’s prominent role in the project could pass as being of little help to its primary business of being a custodian.
That, however, is far from it according to the firm. Notably, the financial services and custody provider will handle minting of new coins as well as provide storage for the bitcoin reserves that back up the ERC-20 tokens.
Chan has also said that BitGo’s role is likely to be pivotal in the firm’s ambitions in the tokenization space going forward.
He added that long-term, the company envisages a scenario where “digital assets drive the global economy.”
Chan claims that several other firms have reached out to BitGo to “wrap” other currencies and digital assets. And all that could happen given that the Palo Alto-based firm has built a platform that “can support stocks, bonds, and so on.”
That is exciting news, but Chan has explained that regulatory hurdles could mean rolling out representations of tokenized U.S. equities will take a while longer.
Reportedly, all Wrapped Bitcoin smart contracts are audited by third-party firms, and that users can observe on-chain proof of reserve indicating that minted WBTC is backed exactly 1:1 by BTC.
According to CoinMarketCap, the WBTC token is trading at $3,503.05 at the time of writing. Bitcoin, on the other hand, is exchanging hands at $3,489 having declined by about 2.73 percent on the day.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.