Wrapped BTC will allow Bitcoin trading on Ethereum networks

27 Oct, 2018
by Arthur Sillers
Wrapped BTC will allow Bitcoin trading on Ethereum networks

According to Business WireWBTC, short for ‘Wrapped Bitcoin’ is being unveiled by Bitgo, Kyber, and a number of other blockchain enterprises. WBTC is a kind of ‘BTC backed’ ERC token, a notable step in the exciting direction of blockchain interoperability.

The WBTC token is an ERC20 token which represents a Bitcoin, but is tradeable on the Ethereum blockchain, hence it is a BTC ‘wrapped’ in Ethereum. The protocol that WBTC has developed does not enable full integration of Bitcoin and Ethereum’s protocols, but it adds liquidity for BTC, who can now trade Bitcoin, the most popular cryptotoken, on Ethereum platforms, which boasts higher transaction speeds than Bitcoin networks.

WBTC has analogous programming protocols like Wine, the virtual Windows operating system which allows Mac users to run Windows programs by translating the underlying code between the operating systems. Similarly, WBTC translates the Bitcoin blockchain for an Ethereum network and allows them to trade an abstraction of the BTC native token with this translation.

This will facilitate traders to utilize the benefits of the Ethereum blockchain while also broadening the trading capabilities of ERC20 networks which will be especially important for Bitcoin traders who want to take advantage of DEXs.

It should be pointed out that using WBTC sacrifices privacy, because it requires a user to go through KYC/AML procedures in order to exchange Bitcoin for Ethereum, which many who use ERC20 platforms and DEXs are specifically trying to avoid. While perhaps this defeats the purpose of using a DEX for some, WBTC describes potential use cases such as enabling dApps to accept Bitcoin “for lending protocols, funds, prediction markets and token sales” which ordinarily wouldn’t accept the mainstay cryptocurrency.

While this protocol does not offer full interoperability, it is an important step towards synthesizing the disparate crypto technologies, and hopefully presages many such steps towards integrating the broad blockchain ecosystem and creating a connected crypto marketplace. The technology will go live in January 2019, and the CTO of BitGo notes, 'I think this is a great application of the flexibility and power of blockchains, and it’ll drive greater interoperability and utility throughout the entire ecosystem' adding expectations that the technology will be generalized to more tokens in the future.

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