Preston Byrne, a partner at Byrne & Storm, P.C., a firm that advises cryptocurrency companies, criticized Ethereum co-founder, Vitalik Buterin for his tweet praising the wrapped Bitcoin on Ethereum (WBTC) project.
Byrne said that the solution is inelegant because it requires users to send their BTC to a random address, simply to gain exposure to ETH. Furthermore, the solution requires users to trust the third-party’s claim that each token is worth exactly 1 BTC.
It’s not “wrapped BTC on Eth.”
It’s “I spent my BTC to an address I don’t control, and all I got was this lousy exposure to Eth which a trusted third party oracle says is worth 1 BTC.” https://t.co/K4qGZ2nusN
— Preston Byrne (@prestonjbyrne) August 17, 2019
WBTC was launched in January 2019 as an ERC-20 standard compliant token on the Ethereum network and is supposedly pegged 1:1 to the value of Bitcoin.
WBTC Growing Faster Than Lightning Network
Byrne pointed out the Price Oracle part of the WBTC documentation and expressed his concern over the involvement of a single trusted actor. WBTC has also been involved in a number of controversies since its launch and has faced criticism over its use of third-party custodians like BitGo.
While WBTC’s capacity has been growing rapidly, the Lightning Network’s capacity has been falling since May 2019. Currently, the amount of Bitcoin locked up in the Lightning Network stands at around 911 BTC or approximately $9.5 million. The amount of BTC locked in WBTC, on the other hand at present is 562 BTC, amounting to $5.9 million according to the DeFi Pulse, a finance tracking site.
WBTC’s rise can also be credited to cryptocurrency infrastructure providers giving asset support to its users. Compound protocol, an open-source lending platform, added WBTC after it received an overwhelming response from its community. The platform allows users to earn interest on and borrow WBTC, with over $32,000 worth of WBTC loans already issued.
The Wrapped Bitcoin Initiative
The WBTC initiative is run by a Decentralised Autonomous Organization (DAO) that has a total of 26 partners. The project is spearheaded by Kyber Network, who offer the protocol for swapping different tokens, Republic Protocol, a cryptocurrency exchange, and BitGo, the blockchain financial services company that provides custodial solutions. Other members include Ren, Compound, and MakerDAO. The WBTC initiative went live on January 31, 2019.
The purpose of Wrapped Bitcoin is to bring liquidity to the Ethereum network and allow funds held in Bitcoin to be used within applications on the Ethereum network. Users can exchange their BTC for WBTC, which involves a swap of a user’s BTC to a custodian who mints an equal amount of WBTC.
Do you believe WBTC can provide stiff competition to the Lightning Network? Let us know your thoughts in the comments below.
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Images courtesy of Twitter.