WBTC or also known as Bitcoin wrapped, The ERC20 token supported on bitcoins has been enabled on Ethereum's core network since January 29 for its trade.
The information was widespread on social networks by the company Staked, confirming not only the launch of the new token but also the amount of assets issued yesterday. Through the WBTC, now there are 65,421 BTCs represented in Ethereum, which can be used in smart contracts for decentralized exchanges, forecast markets and decentralized loans, among others.
Bitcoin Wrapped (WBTC) is now alive!
There are now 65.4217 BTCs represented in the blockchain Ethereum.
– Staked (@staked_us) January 29, 2019
If this number is true, Ethereum would have a higher proportion of bitcoins represented in your network than those that currently exist in the side chain Bitcoin, Liquid. According to data from Liquid Horse, this blockchain currently has a total of 53.32 BTCs represented in its network, that is, an approximate value of 12.10 BTC lower than those represented in the Ethereum through the WBTC.
If https://t.co/xAbNgsjy2i is correct, it means that there is already more BTC represented in the Ethereum than in the very ballyhooed sidechain string pic.twitter.com/u8yZ0N8o6Y
– Adam Tyree Finch (@atyreefinch) January 30, 2019
The WBTC token is an initiative led by the BitGo Cryptographic Custodial startup as well as the decentralized Kyber Network and Republic Protocol exchange houses. The launch of this new token was announced in October 2018 in a press release explaining that Wrapped Bitcoin (WBTC) is an ERC20 token supported on bitcoins in a representative ratio of 1: 1, The main objective of this initiative is to combine the Bitcoin liquidity and the Ethereum programming language.
The WBTC is a symbolic representation in the Ethereum of protected bitcoins. Users who wish to acquire Bitcoin Wrapped go to the Kyber Network and Republic Protocol exchange houses, which own and distribute this ERC20 token, exchanging their bitcoins for that token. In this way, the bitcoins delivered to the cambo houses are handed over to BitGo for safety, a company that keeps them in a multi-signature portfolio and delivers the WBTC in return.
All operations of this token will be registered in the Ethereum network. The governance will be carried out by an Autonomous and Decentralized Organization (DAO) composed of representatives of MakerDAO, Dharma, Airswap, IDEX, Compound, DDEX, Hydro Protocol, Set Protocol, Prycto, Kyber Network, Republic Protocol and BitGo. They clarify that, in the future, more participants will be able to join this DAO.
The WBTC is a type of representative bridge between the two networks. In this way, the decentralized exchange houses that make life in Ethereum can benefit from the liquidity of Bitcoin, which is one of the largest volume of transactions in the world-wide exchange bureau market – such as Binance, Coinbase and Bitfinex -, incorporating it representatively by means of a token anchored.
"Today, most of the transaction volume occurs with bitcoins in centralized currency exchange offices. The WBTC changes this, bringing Bitcoin's liquidity to DEX (decentralized exchange) and enabling Bitcoin to use symbolic transactions, "the press release says.
Another characteristic offered by the WBTC, according to its creators, is that this ERC20 token will allow Bitcoin users to use Ethereum's smart contracts, so that the protocols for loans, securities, tokens and forecast markets can be canceled, in a decentralized way, with Bitcoin.
The WBTC seems to be a centralized alternative to the proposal of the atomic exchanges that the cryptomoedas community has been developing since last year, which allows the interaction between different blockchain through programmed and decentralized exchanges between the two networks. Centralized because the custody of the bitcoins they support will be the responsibility of a single central authority.
One of the most frequent criticisms in the social networks about Bitcoin Wrapped is the fact that this service will be centralized, a characteristic that was confirmed by the initiative. "This token is highly centralized since it is issued by the exchange agencies and the BTCs are protected by an entity," they explain in one of their publications.
In addition to the fact that the token will be centrally issued and managed by the entities, it is also important to take into account that the audit of this token will be performed by a DAO whose representatives are members of the companies and communities participating in the issuance of the WBTC. One might think that this organization is not as decentralized and autonomous as the cryptomedean community could expect.
However, for greater autonomy of this service, the DAO authorities will be removed and aggregated to the said organization by means of democratic votes among its members, being able to maintain a greater balance of power between the entities that issue the tokens.
According to the lack of decentralization, Sunny Aggarwal – researcher and developer of the Tendermint team – believes that the custody of bitcoins is also a high risk service and that these types of tokens, anchored to a protected crypto-currency, may be subject to the same regulatory policies as other currencies, mentioning as an example the symbol anchored in the Dollar of Circle (USDT), which has been reported by users due to the possibility of censorship their issuers have.
Remember that this footprint is extremely centralized and carries a high custody risk. It is also in the same regulatory paradigm as things like the USDC. https://t.co/lirjrx5xb4
– Sunny Aggarwal (@ sunnya97) January 30, 2019
Customers who purchase WBTC also need to take into account that they are betting on exchanging their bitcoins for representative bitcoins and that they will perform operations on a network that is not as secure as Bitcoin. Ethereum is a blockchain that since its launch suffered several bifurcations and some bugs. In addition, it does not have the same processing power as Bitcoin, which exposes it to possible attacks.
Among other criticisms and debates after the launch of the WBTC, highlights a tweet by Eric Wall – the engineer and director of Cinnober – who ironically commented on the news: "Ethereum is officially the Bitcoin side chain," an assessment that has generated Twitter discussions and equally sarcastic responses from users who consider Bitcoin to have become "A token" or "a decentralized application" of Ethereum.
Great day in cryptography. Ethereum is now officially a Bitcoin sidechain. https://t.co/hIzi7SUniv
– Eric Wall (@ercwl) January 29, 2019
Other Users Responded that the term "side chain" can not be applied in the case of WBTC, since Ethereum is not used as a "validating data from another chain" network, as in the case of networks such as Liquid, BTCRelay and Lightning Network that validate the transactions.
By definition: "A sidechain is a blockchain that validates data from other blockchains."
The 2-way peg is an orthogonal concept.
– Alex Mizrahi (@killerstorm) January 29, 2019
Ethereum will also not help you scale Bitcoin, one of the main functions of the side chains. However, the creators of WBTC want to take advantage of the full turing properties of Ethereum to allow for "greater usability" of Bitcoin, since the programming language of this blockchain is limited. This same goal is pursued by startups such as RSK, which for several years has been working on the incorporation of smart contracts into the Bitcoin network through a side chain.
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