On 31 January 2019, an Ethereum (ETH)-based ERC-20 token backed 1:1 with Bitcoin (BTC) was launched on the Ethereum blockchain according to the network’s press release on its website. The coin, named ‘Wrapped Bitcoin (WBTC)’, was first announced back in October 2018 and a joint initiative between liquidity protocol Kyber Network, decentralized crypto exchange Republic Protocol and blockchain security company BitGo.

The firm behind the token stated that WBTC will be able to bring users various decentralized utilizations that are new to the Ethereum network, such as using them as collateral for stablecoins or lending. Additionally, the token could also be useful while creating smart contracts or making typical payments.

The WBTC network’s press release stated that WBTC is capable of bringing BTC’s liquidity, which is considered the best among cryptocurrencies, to the Ethereum ecosystem, allowing users to trade tokens on decentralized exchanges with BTC’s value. According to the press release, all smart contracts involving the token were audited by third-party companies, and proof of reserve was available on chain showing an exact exchange ratio of 1:1 between WBTC and BTC.

To exchange WBTC with BTC, users can approach authorized merchants and go through necessary identification processes related to KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. The merchants utilise a smart contract technology called ‘atomic swap’ which enables exchange of cryptocurrencies from different blockchains without using centralized intermediaries. Current merchants that facilitate such exchanges include AirSwap, Dharma, ETHfinex, GOPAX, Kyber Network, Prycto, Ren and Set Protocol.

At the time of writing, WBTC is trading at a price of $3,474.86 according to CoinMarketCap, which is slightly higher the BTC’s trading price of $3,467.00.

Vitalik Buterin, the creator of Ethereum, previously voiced his concerns over the token swap system which is centralized in a sense through a tweet. However, WBTC’s network press release stated that “WBTC will remain a firmly community-led initiative”. The statement was possible according to the press release because the fundamental structure of the token and ongoing contribution from its team members to openness provide the required essentials to create a “transparent process framework and governance structure”.