Bitcoin on the Ethereum Blockchain? Welcome to 2019
167 | 10/28/2018 12:05:19 PM
We all know what BTC, BCC, and ETH are. But new to the reader may be symbol WBTC – short for “wrapped Bitcoin,” which will essentially be a token on the Ethereum blockchain tied directly to the value of Bitcoin. A combined effort of Kyber Network, Republic Protocol and BitGo, the token will have two important effects on cryptocurrency.
First, it will enable Bitcoin to participate in Ethereum smart contracts natively on the Ethereum blockchain. While multiple efforts to initiate smart contracts on Bitcoin’s own chain have historically been undertaken, including QTUM, which runs the Ethereum Virtual Machine on the Bitcoin network, and Rootstock, which mirrors the features of Ethereum for Bitcoin, Ethereum remains the dominant mode in terms of smart contracts. Nevertheless, the prospects of Ethereum decentralized applications have been called into question recently.
Second, it will enable the value of Bitcoin to directly impact a token on the Ethereum blockchain. The tokens will be backed by the reserves of BitGo and the other participants in the project, and transparent inititatives are in progress to ensure that investors are clear about what they are holding. Accordingly, if one holds 1 WBTC, one has the equivalent value of 1 BTC.
Kyber network writes in a blog on the subject:
First off, Kyber will provide initial liquidity for WBTC tokens through our reserve, so that it can be exchanged like any other supported ERC20 token on our protocol. At launch, together with Republic Protocol, we will serve as initial merchants to provide a platform for KYC’d users to atomically swap between BTC and WBTC tokens.
The point of the project seems to be to allow seamless transition between Bitcoin and Ethereum. If one is already holding Bitcoin, he can easily get it onto the Ethereum network as a WBTC token, and then he can further cash out at any time back to Bitcoin. The use of a centralized exchange will not be necessary if one is equipped with Kyber Network or any of its partner, and Kyber envisions a vast expansion of the project as things progress.
The current iteration of WBTC is just the first step of the journey to an ideal decentralized solution, and it is important for the community to work together towards a more innovative, interoperable ecosystem.
Several exchanges have already committed to listing the token. One interesting thing from a trader’s perspective will be whether or not there will be arbitrage between BTC and WBTC, or if WBTC prices will be locked in step with BTC ones.