There are new tokens launched on the Ethereum (ETH) blockchain every day, but how many of those are backed by the most well-known cryptocurrency, Bitcoin (BTC)?
BitGo recently announced that they’re creating an Ethereum-based WBTC token which will be fully-backed by Bitcoin. Named “Wrapped Bitcoin,” this token represents Bitcoin, while being interoperable with the Ethereum protocol.
Who is Behind the WBTC Token?
The “Wrapped Bitcoin” token is a community-focused initiative and the result of joint efforts between decentralized exchange (DEX) start-ups, Kyber Network and Republic Protocol, as well as cryptocurrency custody company BitGo. Launch members and supporters also include: MakerDAO, Dharma, Airswap, Gnosis, IDEX, Radar Relay, Compound, DDEX, Hydro Protocol, Set Protocol and Prycto.
BitGo will use their Bitcoin reserve to act as the primary custodian and back-up all WBTC tokens. Unlike other asset-backed coins, the nature of this project allows investors to witness proof-of-reserves by directly viewing the holdings on the two public blockchains (Ethereum and Bitcoin). This is a major step forward in stable coins and the cryptocurrency industry as a whole.
Currently there’s a lot of controversy surrounding the USD-backed cryptocurrency Tether (USDT). Much of the crypto community believes that Tether has not been fully transparent with its U.S. dollar holdings.
In the long term, the goal is to onboard several custodians and merchants. This will increase usage and adoption of the WBTC token, while opening up new applications and use cases for Bitcoin.
WBTC: Shaking Up Asset-Backed and Stable Coins
One rather sophisticated reason to use this “Wrapped Bitcoin” token would be to use Bitcoin as the default currency inside Ethereum dapps (decentralized applications). In theory, you could use the WBTC token as an exchange base currency that could trade against other cryptocurrencies.
The WBTC token also makes it easier for ICO’s to raise money in Bitcoin. This is possible because everything could be done on the Ethereum blockchain; meaning fundraisers don’t have to run multiple nodes.
Loi Luu, CEO of Kyber Network, emphasized that with the official launch of the “Wrapped Bitcoin” token in January 2019, a decentralized autonomous organization (DAO) would be activated and tasked with ongoing management/development of the project. This DAO will govern the whole project, putting it in charge of making major upgrades, adding features, adding merchants, and more.
It is not currently clear what members will form the DAO, and how DAO members will vote on improvements to the WBTC token. One thing that’s certain is that decentralized leadership will be a key component to both the decentralized nature and the success of the WBTC token.
Article By: Timothy Atkins
