Kyber Protocol and Republic Protocol team up with BitGo (a Goldman Sachs supported custody firm) to bring us WBTC aka “wrapped Bitcoin.” The new ERC-20 token will run on the Ethereum blockchain and be directly tied to Bitcoin’s value.
We all are at least familiar with Bitcoin and Ethereum by now, but that doesn’t make the idea of Bitcoin running on the Ethereum network any easier to wrap our heads around (pun intended). The WTBC token will map 1-to-1 BTC to WBTC allowing Bitcoin to exist as a valid currency exchanged via smart contracts written on the Ethereum blockchain.
Smart contracts are programs that run on-chain to execute upon a specific event automatically; the even then triggers usually the release of cryptocurrency funds. A smart contract on the Ethereum network would typically deal in ETH where financial transactions are concerned, now with WBTC can participate in Ethereum smart contracts native to the Ethereum blockchain.
Why is this crucial for the future of both Bitcoin and Ethereum? Well, while Bitcoin remains in the #1 spot on Coinmarketcap consistently, it does not have viable smart contracts on the Bitcoin chain. Ethereum, though it plays second fiddle to Bitcoin as far as cryptocurrency trade volume has innovated the industry-dominant platform for smart contracts.
Now the value of Bitcoin will have the potential to impact a token on the Ethereum blockchain. If you have 1 WBTC, then you effectively have 1 BTC and vice-a-versa. BitGo will have a reserve, and back all WBTC tokens and Kyber will provide initial liquidity through providing a platform for KYC’d users to swap WBTC to BTC seamlessly.
The main goal for the collaboration hints at frictionless interactions between Bitcoin and Ethereum. Bitcoin holders will be able to access the Ethereum network using the wrapped Bitcoin and then swap back to BTC at any time. The focus seems to be on the larger crypto and blockchain community and efforts to create an improved ecosystem.
WBTC will soon be available to trade on popular cryptocurrency exchanges.