Wrapped Bitcoin (WBTC) is now launched on Ethereum as an ERC20 token according to a press release published on January 31. It is fully supported by Bitcoin and is now accessible for trading on various applications and platforms. WBTC is the first ERC20 token backed 1:1 with Bitcoin.
WBTC was first announced in October 2018, as a joint enterprise by BitGo, Kyber Network, Ren (earlier Republic Protocol), with 26 community partners and 15 DAO (Decentralized Autonomous Organizations), to bring Bitcoin’s liquidity to the decentralized ecosystem on Ethereum and enhance all decentralized applications (dApps).
BitGo posted on Twitter about the launch of Wrapped Bitcoin. The WBTC is the first asset-backed token with a transparent public dashboard for community verification. Earlier BitGo had announced that it has developed a platform which allows traders to transact directly with its secure cold storage.
WBTC will enable the Ethereum network to be leveraged to facilitate new applications and use cases for Bitcoin. WBTC standardizes Bitcoin to the ERC20 format, so dApps such as Dharma, dYdX, Compound, bZx, Maker, Set protocol, Gnosis, and more can leverage Bitcoin for decentralized lending, margin trading, and derivative markets.
Ethereum ecosystem further compels for new applications and use cases which will be identified, explored and implemented as the ecosystem proceeds to grow and actively innovate.
The makers of WBTC explained in the official website as to why there’s a need for WBTC,
“WBTC standardizes Bitcoin to the ERC20 format, creating smart contracts for Bitcoin. This makes it easier to write smart contracts that integrate Bitcoin transfers.”
Bitcoin’s liquidity into Ethereum will enhance WBTC and makes it possible for traders to utilize Bitcoin value for token trades on decentralized exchanges (DEXs) such as RenEx, DDEX, AirSwap, KyberSwap, ETHfinex, IDEX, TheOcean, Radar Relay, Loopring, Switcheo Network, and Dolomite.
Wallet providers such as imToken and exchanges will now be capable to decrease overheads with the facility to support multiple currencies while maintaining just an Ethereum node.
WBTC works in three stages i.e., Receiving, Minting and Burning which are explained below:
- Receiving: A user requests tokens from a merchant to receive WBTC. The merchant then completes the required KYC and AML procedures and checks the user’s identity.
- Minting: Minting refers to the process of producing new wrapped tokens. Minting in the wrapped framework is opened by a merchant and performed by a custodian.
- Burning: Burning is the procedure of redeeming Bitcoin for WBTC tokens, and only merchant addresses can perform this. The amount to be ‘burnt’ is subtracted from the merchant’s WBTC balance (on-chain) and the supply of WBTC is then reduced.
All the WBTC smart contracts have been audited by reliable third-party audit firms like Solidified Technologies, ChainSecurity, and Coinspect. The first WBTC on the principal Ethereum chain has been minted and burnt which can be observed on-chain on Ethereum.
The proof of reserve is on-chain, which confirms the exact 1:1 between minted WBTC tokens and Bitcoin collected by the custodians.
The fundamental design of WBTC and the enduring commitment of all the members to openness will form essential building blocks for a transparent process of framework and governance structure.
Relying on these foundational principles, WBTC will prevail as a community-led initiative into the future. It concentrates on driving the continued innovation for the improvement of the entire ecosystem.
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