The much-awaited Wrapped Bitcoin (WBTC) has now been finally launched as promised this month, becoming the first tokenized Bitcoin ERC20 token launched on the Ethereum platform.
What is Wrapped Bitcoin (WBTC)?
Wrapped Bitcoin (WBTC) has been a long term project between “the world’s largest processor of on-chain bitcoin transactions” BitGo, Kyber and Republic Protocol, and which came into limelight last year after extended preparations. The project, scheduled for launch this month, finally launched towards the close of January.
The initiative is targeted at leveraging the strong benefits offered by both Bitcoin and Ethereum, seizing the mass adoption of Bitcoin all over the world and combining its liquidity strength with the wit of Ethereum’s smart contract protocol.
The creation of WBTC, according to Ren’s official publication of the tokenized coin is set to offer immense benefits to both Bitcoin and Ethereum over time, as the innovators see WBTC facilitating important developments such as use cases on decentralized exchanges and loan services amongst a host of other possible advantages.
How WBTC Works
According to an announcement made by Trustnodes, apart from the aforementioned Republic Protocol and Kyber, a host of six other intermediaries would be the first to provide services facilitating conversion from BTC to WBTC and vice versa. The release read:
“Eight initial merchants will be facilitating conversion between WBTC and BTC: AirSwap, Dharma, ETHfinex, GOPAX, Kyber Network, Prycto, Ren, and Set Protocol.”
While the Wrapped Bitcoin (WBTC) is a new project offering a new dimension to solving existing problems, it shares certain qualities with Republic Protocol’s—now Ren—own partner in True USD (TUSD).
Based on a custodian model on low-level trust, the coin is fairly centralized solutions provide its own advantages. Wrapped Bitcoin is built on a 1:1 custodian model that entails traders and investors entrusting merchants with their BTC in return for wrapped Bitcoins (BTC).
One of the major differences to existing methods is the optimized architecture allowing users to see the Bitcoin addresses that their coins would be entrusted with. This increases trust and certainty and nudges existing methods based on tokenized fiat transactions. Highlighting other benefits, the project press release read:
“By bringing Bitcoin’s liquidity to Ethereum, WBTC also makes it possible for traders to use Bitcoin value for token trades on decentralized exchanges (DEXs) such as AirSwap, DDEX, ETHfinex, IDEX, KyberSwap, Loopring, Radar Relay, RenEx, Switcheo Network, TheOcean.”