In January 2019, a new ERC20 token is to be introduced on the Ethereum block chain, which will be covered one-to-one by Bitcoin. Kyber Network (KNC), Republic Protocol (REN) and BitGO have joined forces to develop Wrapped Bitcoin (WBTC).
Bitcoin and Ethereum have always worked independently of each other. While Atomic swaps and interoperability protocols have been under development for some time, full compatibility between networks whose code is foreign to each other is a complex task. The new project Wrapped Bitcoin (WBTC) wants to solve this problem by providing an ERC20 token, the WBTC, which is secured by “physical” reserves of BTC and is expected to remain bound to the value of Bitcoin.
The companies behind Wrapped Bitcoin include the decentralized exchanges Kyber Network and Republic Protocol, as well as the crypto depository BitGo. In addition, a number of Ethereum-based projects support the introduction of the token. These include other decentralized crypto currency exchanges and other Ethereum projects, such as Airswap, Ddex, Hydrogen, Set Protocol, Compound, MakerDAO, Dharma, Prycto, Idex, Gnosis, Radar Relay and Blockfolio.
The website of Wrapped Bitcoin says:
WBTC standardizes Bitcoin to the ERC20 format and thus creates Smart Contracts for Bitcoin. This makes it easier to write smart contracts that integrate Bitcoin transfers. The Ethereum network processes transactions faster than the Bitcoin network, so Bitcoin owners no longer have to wait. With WBTC, Bitcoin’s switching between exchanges is much faster.
The aim of the project is to replicate the benefits of Bitcoin in such a way that BTC is interoperable with Ethereum and thus decentralized applications and smart contracts for Bitcoin and its ERC20 token representation can be developed.
Loi Luu, co-founder and CEO of Kyber Network said about the project:
This initiative will bring together Bitcoin’s liquidity and Ethereum’s extensive Smart Contract Developer ecosystem. Applications on Ethereum such as distributed exchanges and financial protocols will all be able to seamlessly use Bitcoin and create Bitcoin trading pairs that were previously impossible. At the same time, the use of Bitcoin is extended by more decentralized use cases such as stock exchanges, loans, token payments.
Since wrapped bitcoin (WBTC) is covered one-to-one by reserves in bitcoin, a custodian is required. This will be BitGo as the principal depository holding a reserve of Bitcoins to secure all embossed WBTC tokens in circulation on the Ethereum block chain. In the long term, further custodian banks and traders are to serve as custodians in order to promote the growth of the project. To this end, a decentralised autonomous organisation (DAO) is to be activated and charged with monitoring the further development of the project. DAO members will be able to vote and decide on future developments and any proposed improvements.
The reserves in Bitcoin should be independently verifiable for everyone via a website and all addresses of the BTC.