BitGo Launches Ethereum-based “Wrapped Bitcoin” for Providing Liquidity to dApps and DEXs
On October 26, 2018, crypto-finance company BitGo announced the launch of Wrapped Bitcoin (WBTC), an ERC20-compliant token built on the Ethereum blockchain and collateralized on a one-to-one basis with bitcoin.
“Power of Bitcoin”
Described as the “Power of Bitcoin and the Flexibility of ERC20,” the token’s website notes a majority of bitcoin trading takes place on centralized exchanges, which causes decentralized counterparts to face low liquidity and participation.
To address the above concerns, WBTC is aimed at providing greater liquidity to Ethereum-based applications and decentralized exchanges (DEX) with a bitcoin-equivalent for swift payments and collateral purposes.
BitGo will provide custodial services of all bitcoins exchanged as collateral and “mint” WBTC after community approval. The move lends transparency to the cryptocurrency-as-collateral business model and fits with BitGo’s broader vision of making “digital currencies usable for business.”
WBTC will be tokenized with a “full proof” of underlying bitcoin reserves, unlike the myriad of questionable stablecoins in circulation. The lack of verifiable collateral is a critical feature absent from the cryptocurrency markets today, which causes concerns of further market busts and threatens to erase the core ethos of digital assets: Shifting away from an opaque, centralized, and unverifiable financial system.
Each bitcoin backing a particular WBTC can be traced using a dashboard which displays wallet addresses and corresponding balance, while enthusiasts can track each token using an ERC20-focused block explorer like Etherscan.
Myriad Use Cases
The release ascertains WBTC can be used to collateralize other stablecoins, via an accountable and trusted asset type, while finding use in crypto-lending models or fulfilling payments for flexible smart contracts in the Ethereum ecosystem.
While the WBTC is scheduled for a January 2019 launch, several decentralized applications (dApps) are on board to utilize the product within their framework, including dark pool protocol Republic Protocol, stablecoin issuer MakerDAO, crypto-lending platform Dharma, and decentralized wallet-to-wallet trading service Airswap. Enumerating on the launch and factors leading to it, BitGo noted on its blog:
“We’ve seen significant institutional interest in the tokenization of assets like securities, commodities, and real estate. WBTC is an opportunity to contribute technical leadership to the advancement of blockchain and tokenization platforms.”
Meanwhile, the firm believes WBTC’s success can be leveraged to create comparable products and support asset tokenization. The release highlights the creation of a “digital gold” token while referring to its efforts to create Royal Mint Gold (RMG), a 2017 initiative that saw BitGo partner with the U.K. Royal Mint and Chicago Mercantile Exchange (CME) to transform physical gold into a digital asset.