Why Do We Need to Wrap Bitcoin?

Why Do We Need to Wrap Bitcoin?

BitGo, Kyber Network, MakerDAO, IDEX and many other crypto companies partnered to create a Bitcoin-backed Ethereum token, Wrapped Bitcoin. This token will represent BTC, 1 token equal to 1 BTC stored in the custody of BitGo. It could be used to trade BTC on DEXes, the whole administration will be via DAO, similar to Maker system

The idea of issuing a Bitcoin-pegged token is a genius idea. If there are dollar-pegged cryptocurrencies, stablecoins, and there are gold-backed tokens, such as DigixDAO, why there shouldn’t exist a token, pegged to a digital gold, Bitcoin?

It might seem strange at first, but the more you think about it, the more it makes sense:

  • Bitcoin is a main financial instrument on crypto markets and is considered a commodity in regular markets, such as CME or CBOE exchanges. Any mature market for any commodity has derivative instruments, for example, future contracts. We see that the institutional players create derivatives for Bitcoin. These instruments are from the old world, but the crypto market can create its own, new forms of derivatives. All of them, both old and new ones, can coexist without any problem.
  • This WBTC token is totally legit. Each token is backed by one BTC, you have to place it in the vault to create a token. That doesn't mean creating Bitcoins out of thin air.
  • Its usefulness can't be underestimated. Traditionally, Bitcoin is traded against all altcoins on centralized exchanges. However, it can't be traded on DEXes, since most of decentralized exchanges work on Ethereum, being a set of smart contracts for trading, and Bitcoin has its own chain, being unable to interact with Ethereum. Now with a redeemable WBTC token every single ERC20 token can be traded on any DEX in a BTC pair, and the profit exchanged for BTC, if necessary. Isn't it glorious? Traders will have an opportunity and more reasons to move to decentralized exchanges without that KYC and AML stuff, and still have the same spectrum of trading instruments that they're used to on centralized exchanges.

Of course, Bitcoin maximalists would always be unhappy with anything that isn't Bitcoin. They would love to see altcoins dying in flames. Everyone else has a reason to welcome this initiative because it adds more diversity to the market.

The list of companies, that participate in the development, includes BitGo, that will provide a vault for storing BTC, Kyber Network and IDEX, two decentralized (well, semi-decentralized in case of IDEX) exchanges, and MakerDAO. Here it gets interesting. If this whole Wrapped BTC system works similarly to the already working projects of Maker, then it won't require any maintenance for years, because MakerDAO works flawlessly without any centralized authority. Given that it was mentioned that WBTC will be a DAO, there's a high chance that it will be built on Maker tech.

Does everyone have to complain every time when they get an important update to the ecosystem? This token is a great addition that will allow using new trading and hedging tactics, and maybe even provide decentralized Bitcoin loans, based on Ethereum smart contracts. It’s hard to tell now how many ways to use it people will come with, but one thing is clear: it will create more opportunities on the market, not take them away.

BTC

4,002 USD
-1.37%

WBTC

0.000440 USD
0.00%

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Prominent Analyst: Bitcoin (BTC) is Likely to Surge to 400k, Does This Mean the Bottom is in?

Bitcoin’s price action over the past year and a half has been quite the rollercoaster, with many investors incurring nearly instant wealth in late-2017, followed by tremendous losses for those who continued to hold their Bitcoin or other crypto investments. Despite this, those who held and are still holding are doing so either because of a fundamental belief in the technology, or at the very least a belief that the markets will eventually surge back to, or above, their previously established all-time-highs. That being said, recent comments from a prominent analyst about the potential Bitcoin’s price has to surge significantly higher will certainly be reassuring for embattled crypto investors who have been discouraged by the recent market conditions. Bitcoin (BTC) Drops to $4,000 as Support Level is at Risk of Being Broken At the time of writing, Bitcoin is trading down over 1% at its current price of $4,015, just a hair above its recently established support level at $4,000. Yesterday, Josh Rager, a popular cryptocurrency trader on Twitter, explained that the lack of buying pressure above $4,000 is likely to lead BTC’s price to $3,500, which may be reached soon if the crypto’s bulls are unable to keep Bitcoin’s price above $4,000. “$BTC Weekly Chart. Gandalf is holding $BTC below the mid $4,200 level. Bitcoin shall not pass the current resistance. So my target for the next drop has an aim at previous support near mid $3,500s,” he explained. $BTC Weekly Chart Gandalf is holding $BTC below the mid $4,200 level Bitcoin shall not pass the current resistance So my target for the next drop has an aim at previous support near mid $3,500s pic.twitter.com/BGUWMmAl4V — Josh Rager (@Josh_Rager) March 20, 2019 Naeem Aslam, the chief markets analyst at Think Markets U.K., recently spoke about the importance of the $4,000 level, noting that it will set the trend for which direction the markets head next. “Questions are being asked constantly when it comes to Bitcoin’s battle with the $4000 mark. The result of this battle sets the tone for a bullish or bearish trend,” he explained, further noting that this price level has become a “matter of death or life for crypto traders.” Could Bitcoin Surge to $400,000 Next? Although Bitcoin’s instability around its current price levels does seem to be significant in the short term, in the long term it may be very insignificant, as Aslam believes that BTC could eventually surge as high as $400k. “I personally believe that each Bitcoin can go up as much as $400K and if history repeats itself, this number is not a fool’s paradise. This is a simple math calculation: approximate percentage projection of the price which we experienced during the last bull run,” he bullishly explained. Keeping that in mind, for traders who are waiting to buy the bottom, the risk / reward ratio simply doesn’t make sense. Ryan Selkis, a popular figure within the crypto industry, spoke about the absurdity of trying to purchase a bottom when there is such a massive potential upside for BTC in a recent tweet. “I’d be extremely surprised if the bottom wasn’t in for this $BTC bear market. If you’ve been on the sidelines, what are you waiting for if not now? If you’re a long-term bull, the 5 year EV is 25-50x, and you’re going to wait to time an entry that’s 20% more attractive?” He noted. I'd be extremely surprised if the bottom wasn't in for this $BTC bear market. If you've been on the sidelines, what are you waiting for if not now? If you're a long-term bull, the 5 year EV is 25-50x, and you're going to wait to time an entry that's 20% more attractive? — Ryan Selkis (@twobitidiot) March 21, 2019 As the market’s price action continues to unfold, traders and investors should keep in mind the massive potential Bitcoin and the entire markets have to surge significantly higher in the next few years. Featured image from Shutterstock. Prominent Analyst: Bitcoin (BTC) is Likely to Surge to 400k, Does This Mean the Bottom is in? was last modified: March 21st, 2019 by Cole PetersenThe post Prominent Analyst: Bitcoin (BTC) is Likely to Surge to 400k, Does This Mean the Bottom is in? appeared first on NewsBTC.
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