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Chainlink and BitGo to offer more transparency on genuine Bitcoins

Bitcoin is becoming increasingly popular in DeFi. This is mainly due to the status of BTC and its relevance for the entire crypto industry. However, since DeFi mainly runs on the Ethereum blockchain, Bitcoin can only be used there in the form of “promissory bills” (derivatives or synthesized assets). WBTC is an ERC20 token, which was introduced in January 2019 and reflects the value of Bitcoin

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To use Bitcoins in the form of derivatives on the Ethereum blockchain, tokens deposited with real BTC must be issued. This is the most popular BTC image on Ethereum – WBTC from BitGo.

However, until now there has been a lack of transparency. There was concern that more derivatives were being issued than are covered by Bitcoin. That should now be over. The BitGo crypto custody service and Chainlink have now joined forces to verify the actual stock of genuine Bitcoin.

If you want to read more about Chainlink and how it could provide more transparency, and find why Defi could not survive long without Bitcoin, download for free the Born2Invest mobile app. Our companion app brings you the latest business headlines for you to stay on top of the market.

WBTC’s Bitcoin reserve verified by Chainlink

Chainlink’s decentralized Oracle should help BitGo to gain even more trust. Currently, one has to give Bitcoin into other hands to get a BTC derivative on the Ethereum blockchain. A decentralized verification would be more than helpful at this point.

Since Bitcoin is also about “don’t trust, verify”, this mechanism does not really fit into the basic construct of BTC.

Nevertheless, the community should be convinced with additional transparency to transfer their BTC to the ETH Blockchain in order to participate in the flourishing DeFi market. Chainlink will provide WBTC users with a reliable, demand-oriented source of collateral information and an additional level of transparency for tracking WBTC reserves.

Bitcoin for Ethereum and DeFi becomes more and more important

WBTC is an ERC20 token, which was introduced in January 2019 and fully reflects the value of Bitcoin. In recent months it has taken the DeFi market by storm, with total market capitalization only recently exceeding $1 billion.

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It has now eclipsed the capacity of the Lightning Network and consolidated Ethereum’s status as the leading Layer 2 solution for Bitcoin. At least for now. 

Unlike Bitcoin, the WBTC is fully centralized. Its custody is managed by BitGo itself

Although BitGo is a highly respected company with an insurance fund of USD 100 million, it remains a centralized factor to rely on. So to bring some decentralization to this construct, Chainlink comes into play with its Oracles.

Proof of Reserve allows for decentralized and trust-minimized auditing. As the founder of Chainlink, Sergey Nazarov, noted, the technology makes collateral “bulletproof:

“I think the concept of “proof of reserve” is generally about proving that an underlying asset is somewhere in a certain state. And this proof is actually very fundamental to how financial systems work.”

tBTC tries a reboot

WBTC is not the only synthetic version of Bitcoin plagued by trust issues. Even its current main competitor, renBTC, has secured all genuine Bitcoin in just one address, this does not do justice to the central claim.

Last week the decentralized tBTC protocol developed by Thesis experienced a comeback after the catastrophic launch of its mainnet. The mainnet was only online for two days before it had to be shut down due to a critical error in May.

It remains to be seen if the cooperation with Chainlink and BitGo will lead to a satisfying result. After all, DeFi will not be able to survive in the long run without Bitcoin.

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(Featured image by vjkombajn via Pixabay)

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Valerie Harrison is a mom of two who likes reporting about the world of finance. She learned about the value of investing at a young age upon taking over her family's textile business when she was just a teenager. Valerie's passion for writing can be traced back to working with an editorial team at her corporate job, where she spent significant time working on market analysis and stock market predictions. Her portfolio includes real estate funds, government bonds, and equities in emerging markets such as cannabis, artificial intelligence, and cryptocurrencies.