January 2019 will see a new token launched on the ethereum blockchain. Most surprisingly to some, perhaps many, it will be backed by the world’s biggest cryptocurrency — bitcoin.
The companies behind the initiative include decentralized exchange startups Kyber Networkand Republic Protocol, as well as cryptocurrency custody company BitGo. Furthermore, several ethereum-based projects have already announced that they will support adoption of the new token.
Who are they? According to Coindesk they include, “decentralised cryptocurrency exchanges and finance-focused blockchain projects participating as “launch members,” such as MakerDAO, Dharma, Airswap, Gnosis, IDEX, Radar Relay, Compound, DDEX, Hydro Protocol, Set Protocol and Prycto.”
The new token- called WBTC, or “wrapped bitcoin”, will aim to reproduce the utility of bitcoin in a way that will facilitate any decentralized application running on the blockchain. BitGo CTO, Benedict Chan calls it “the best of both worlds” because it offers both “the stability of bitcoin and the flexibility of ethereum.” He said: “It’s very similar in some ways to how people created banknotes that represented a pound of gold. A pound of gold was heavier and it took longer to trade. You could use a note which represented a pound of gold and it was well accepted.”
BitGo is going to be the primary custodian of WBTC. It will hold a reserve of bitcoins to back all minted WBTC tokens in circulation on the ethereum blockchain. Furthermore, unlike other stablecoins, WBTC tokens will feature a full proof-of-reserves verifiable directly on both the bitcoin and ethereum blockchains.
“The beauty of that is all we have to do is put up a webpage and show all the addresses that have the bitcoins … and at the same time, people will be able to check how many WBTC are in existence just by looking … on the ethereum blockchain,” Chan told Coindesk.
Kyber Network and Republic Protocol will be responsible for disseminating and redeeming WBTC tokens to all users and will use the atomic swaps system for completing transfers of WBTC for bitcoin and vice versa.
Loi Luu, CEO of Kyber Network, commented that with the official launch of the WBTC token in January 2019, a decentralised autonomous organisation (DAO) would also be activated and given the job of overseeing the ongoing development of the project. Luu said: “One of the main reasons why many projects support this initiative is because there’s a DAO that’s going to govern the whole project including making major upgrades, adding more features, adding more merchants, even adding new custodians as well.”