The mission of the new cryptocurrency is to enable Bitcoin users to “participate in Ethereum smart contracts natively on the Ethereum blockchain.”
2018 October Bitcoin custody company BitGo announced a partnership with Kyber Network and Republic Protocol to launch Wrapped Bitcoin (WBTC), a token on the Ethereum blockchain that acts as a 1-to-1 token backed by Bitcoin reserves.
In a blog post announcing the new token BitGo stated:
“WBTC users will be able to utilize Bitcoin in a wide variety of new decentralized use cases, including on decentralized exchanges (DEXs), as collateral for stable coins or lending, for payments and flexible smart contracts within the Ethereum ecosystem.”
Then your Wrapped Bitcoin can fly around the Ethereum ecosystem while the Bitcoin that backs it, and for which you can ostensibly redeem your WBTC at anytime (again by going through the merchant account), sits parked in the custody of BitGo or Kyber.
The way to acquire WBTC, an ERC-20 token on the Ethereum virtual machine, is to buy one from this consortium of cryptocurrency startups by trading in Bitcoin for a “Wrapped Bitcoin,” a transaction that can only be made through an approved merchant account on the Ethereum network (of which there are currently eight):
“To receive WBTC, a user requests tokens from a merchant. The merchant then performs the required KYC / AML procedures and verifies the user’s identity.”
“Once this is completed, the user and merchant execute their swap, with Bitcoin from the user transferring to the merchant, and WBTC from the merchant transferring to the user.”
Why I Think Wrapped Bitcoin is Junk
Hodl
Ethereum Decentralization Is Overrated
WBTC Isn’t Really Decentralized
It’s A Stablecoin
5.Who Needs A Digital Paper Banknote?
WBTC Requires Trusted Third Parties
We Don’t Need No Stinking Tokens