Bitcoin is finally coming to the Ethereum blockchain and it will be an ERC-20 token. Announcing the development of the Bitcoin backed ERC-20 token Wrapped Bitcoin (WBTC), BitGo, one of the partners behind this initiative said in an official blog post that WBTC will provide users with a “wide variety of new decentralized use cases including on decentralized exchanges (DEXs), as collateral for stable coins or lending, for payments and flexible smart contracts within the Ethereum ecosystem.”
This initiative is a combined effort of a consortium of institutions including Palo Alto-based BitGo, Kyber, Andreessen Horowitz-backed MakerDao, AirSwap, Blockfolio, IDEX, and almost a dozen other crypto-focused firms.
According to the BitGo post, WBTC “will bring the stability and value of Bitcoin to Ethereum’s expansive ecosystem of decentralized applications.” The token will be backed on a 1:1 basis to Bitcoin reserves and verified on the Ethereum blockchain. Further details reveal that the collateral bitcoin will be held through qualified and verified custodians.
The WBTC token will be launched in January 2019 and according to the blog post, will be pre-minted by Kyber and Republic Protocol from their own bitcoin inventory and make them available for cross-chain transactions known as atomic swaps. This move is meant to create the initial liquidity when bootstrapping the token launch. BitGo will then hold custody of the pre-minted tokens and will only be allowed to mint any additional WBTC tokens with approval from qualified merchants.
This announcement was received with mixed reactions across the crypto community. After the announcement was published, Republic Protocol CEO took to Twitter to express his excitement on the possibility of this new innovation writing:
“The addition of atomic swap technology to the WBTC initiative will allow users to deposit and withdraw BTC/WBTC securely and with confidence, which will assist in enabling WBTC adoption to reach the masses.”
However, others on Twitter did not hide their confusion about the prospect and the need for a BTC-backed token on the Ethereum blockchain. Andreas M. Antonopoulos, a blockchain proponent only wrote “Why?” while Jackson Palmer, the founder of Dogecoin (DOGE) expressed his confusion with the words “Blockchains on blockchains on blockchains.”