Which “Bitcoin on Ethereum” will have the last laugh?

The number of cross-chain ERC-20 Bitcoins based on Ethereum has experienced a blowout. Now the total locked amount of Wrapped BTC (WBTC) has exceeded 1 billion US dollars.

This huge liquidity data from the Bitcoin network into the Ethereum ecosystem is a milestone, indicating that BTC holders are interested in participating in the Ethereum ecosystem and joining the many DeFi dApps that have created huge value in the past few months.

As WBTC reaches the $1 billion mark, it’s worth talking more about what these ERC-20 versions of BTC are, while also further comparing similar solutions such as tBTC and renBTC.

1. WBTC - Wrapped Bitcoin

WBTC is the ERC-20 version of Bitcoin, designed to bring BTC liquidity into the Ethereum ecosystem. It was initially announced in October 2018 by Kyber Network and BitGo as a joint venture, and was officially launched in January 2019.

It is the first ERC-20 version of BTC and is fully backed on a 1:1 basis as the proof of reserves is on the Bitcoin network and therefore verifiable on the blockchain.

• Data statistics: 1 billion US dollars in locked-up volume, 95,198 bitcoins have been locked-source

• Operated by BitGo since January 2018

• BitGo is the sole custodian of BTC locked in WBTC

• The process is carried out through custodians and merchants. Custodians mint WBTC and hold BTC, and merchants are responsible for communicating with users and custodians to mint WBTC.

• Merchants are responsible for conducting AML/KYC checks and then asking the custodian to mint WBTC

• When users request to return BTC, only merchants can destroy WBTC. The cross-chain wrapping from BTC to WBTC is mainly for large participants, not ordinary traders. View the latest cross-chain wrapping data

• All BTC is held by BitGo, the only custodian

• BTC can be verified on-chain through its “Proof of Assets”

• The entire project is managed by wBTC DAO (Decentralized Autonomous Organization)

• BitGO uses Chainlink as a price oracle for WBTC As the first ERC-20 version of Bitcoin, it has been integrated with many DeFI platforms such as Kyber Network, Airswap, Ren, DDEX, Gnosis, BitGo, Blockfolio, Maker, RadarRelay, DyDx

2. tBTC

tBTC is another ERC-20 token that is 1:1 redeemable with BTC. There are no middlemen in tBTC and no KYC/AML procedures are required. Although it was finally launched in September 2020, it was planned much earlier.

• Statistics: $4.5 million USD locked, 433 Bitcoins locked - Source

• Operational since September 2020

• Users who pledge to obtain tBTC must pledge ETH as a deposit guarantee to act as an anti-spam mechanism - learn more

• A signing group is automatically selected and a BTC wallet is assigned to the depositor. These signing groups also stake some ETH and are therefore incentivized to keep the system running smoothly.

• If one node in a signing group goes offline, everyone in the group loses some of their staked ETH - Twitter description of the incident

• If a user wishes to convert back from tBTC to BTC, this signing group is responsible for exchanging BTC

• No AML/KYC required

• Need to provide Ethereum price to manage liquidations

• Only 1 BTC can be minted at a time

• Reviewed by ConsenSys, Trail of Bits and Sergei Delgado

• Partners and DEXs using tBTC: Uniswap, OasisDEX, Balancer, Kyber Network, Wyre, 1Inch Exchange

3. renBTC

RenBTC is another ERC-20 version of cross-chain BTC. Its virtual machine RenVM can achieve cross-chain decentralization and trustless exchange of cryptocurrency assets.

• Statistics: $305.8M TVL, 25,300 Bitcoins locked - Source

• Operational since May 2020

• Can be minted faster than WBTC and tBTC. Can be minted multiple times per minute at any time without the need for a custodian or manager

• The RenVM dApp will create addresses for users to send BTC, and RenVM will mint RenBTC

• RenVM stores BTC in the Darknodes network

• Even if one-third of Darknodes are offline, the RenVM system can still operate

• RenVM can be easily integrated into any existing dApp

• Using ECDSA private keys to keep data confidential prevents any external entity from preventing users from minting coins or redeeming BTC by burning renBTC

• RenVM also supports BCH and ZEC cross-chain to become ERC-20 tokens

• List of partners using renBTC; Aave, AirSwap, bZx Protocol, Curve Finance, Kyber Full list here

• Where to trade: Huobi, Uniswap, Mooniswap, Balancer, Curve Finance, 1Inch Exchange, Sushiswap

in conclusion

It is difficult to judge which one is better and can have greater development. This is because it all depends on the actual users and their specific use cases. Some users may feel more comfortable by handing their BTC to a custodian with a mechanism like WBTC. But at the same time, the custodian can refuse any redemption if the terms of service are violated.

On the other hand, some other users may prefer a decentralized version, such as in RenBTC, because they believe that cryptocurrencies should be fully decentralized. In this case, users do not have to trust the custodian, but have to trust the smart contract and hope that no hacker attacks it.

Finally, tBTC is yet to be proven. It is the latest version of "Bitcoin on Ethereum". The most concerning part of their system is that ETH is used as collateral when minting tBTC, which with recent news, could hinder the development of the tBTC network. But that doesn't mean I'm not excited for any progress related to this project.