The announcement was made Friday by Republic Protocol CEO Taiyang Zhang via a company Medium post, and has a lot of people in the crypto space already buzzing. The new joint project has been named Wrapped Bitcoin (WBTC), and is reportedly scheduled for a 2019 launch.
Today, in partnership with @KyberNetwork, @republicorg, and our community of launch partners, we're introducing Wrapped Bitcoin, the first ERC20 token backed 1:1 with #BTC – with full proof of reserve. CTO @bencxr explains: https://t.co/dlpQAzigQq #wbtc $wbtc #wrappedbitcoin pic.twitter.com/bgqxrFJ7Eh
— BitGo (@BitGo) October 26, 2018
BTC + ETH
Zhang and company are touting WBTC as a beneficial cross-network initiative able to use both the liquidity and public awareness of Bitcoin and the developer ecosystem of Ethereum to its advantage. For each WBTC created, an equal amount of BTC will be held in custody to back it at a 1:1 ratio, according to Zhang. He goes on to add in the blog post that WBTC will operate in a similar fashion to Tether’s stablecoin, with the notable exception of greater transparency:
“The WBTC remains in circulation until the Bitcoin backing it is withdrawn and the equivalent WBTC is burnt. This method is similar to how TUSD operates, except that WBTC has the benefit of the ease of transparency with all custodian funds being fully verifiable on-chain.”
Zhang says WBTC will act as a guinea pig for future asset tokenization projects on the Ethereum blockchain, and that it presents a range of opportunities for decentralized exchanges (DEXs). WBTC will utilize atomic swaps, allowing for greater trust in the asset, with Kyber and Republic minting the first tokens from their own stash of BTC. Kyber and Republic will also serve as the first merchants to distribute the token.
New Transaction Possibilities
This combination of BTC with the ERC20 protocol gives DEXs and dApps on the Ethereum chain the power to “seamlessly” use BTC, opening up new possibilities for transactions that weren’t previously achievable, according to Kyber Network cofounder Loi Luu, who stated:
“Applications on Ethereum such as decentralized exchanges and financial protocols will all be able to use Bitcoin seamlessly, creating Bitcoin trading pairs which have been impossible until now. At the same time, the usage of Bitcoin will be expanded by having more decentralized use cases, such as exchange, loans, token payments.”
WBTC will also be regularly audited for proof-of-reserve, to continuously verify that every WBTC is backed 1:1 by BTC. These audits will be undertaken by a decentralized autonomous organization (DAO) established at launch. The full specs for WBTC will also be made available on GitHub prior to the January 2019 expected launch date.
Cover Photo by Chris Moore on Unsplash