Kraken brings its wrapped bitcoin token kBTC, following Coinbase, which launched cBTC a few months ago.
Cryptocurrency exchange Kraken has introduced its wrapped bitcoin token, kBTC, “a fully backed, cross-network-compatible ERC-20 representation of Bitcoin.” The company will custody the BTC giving value to kBTC tokens—the kBTC will be backed 1:1 by the BTC, meaning the wrapped token will reflect the real deal’s price.
With the token’s launch on October 17, Kraken has deployed it on Ethereum and its layer-2 OP Mainnet (Optimism), with more chains possibly coming in the near future. The asset will be usable in dApps across both these ecosystems, allowing holders to utilize BTC in DeFi strategies.
Explaining this venture, Kraken said, “Now, with kBTC, you’re not just getting a wrapped token that lets you dive deeper into DeFi, you’re getting Kraken’s 13+ years of industry-leading custody infrastructure,” adding, “This ensures that when you use kBTC, it is backed 1:1 by Bitcoin, securely stored and always accessible.”
Kraken Is Keeping Things as Transparent as Possible
Kraken has also taken the approach of letting users verify the BTC reserves behind its kBTC supply, propagating the trustlessness ethos of blockchain. Centralized wrapper tokens are often criticized for their lack of transparency, but kBTC users can move past that.
The exchange has offered links to its OP Mainnet and Ethereum contracts and BTC custody address, ensuring users can verify the supply matches the reserves. “Don’t take our word for it, see for yourself. We encourage you to inspect our onchain reserves and independently verify the transparency and security that we’ve built into kBTC.”
Kraken enlisted Trail of Bits, a blockchain security company, to audit its contracts. The auditor has greenlighted the usage of kBTC as the contracts are secure from cyber exploits. Trail of Bits has previously audited projects like Worldcoin.
Wrapped bitcoin tokens are the DeFi ecosystem’s way of getting around BTC’s lack of usage in dApps and interoperability. Developers instead create wrapped versions of the asset with ERC-20 compatibility or compatible with the token standard of the needed blockchain so the industry’s central asset can be utilized for raking in returns from DeFi strategies.
Until some time ago, the premier wrapped bitcoin token, called Wrapped Bitcoin (wBTC), was the most favored. However, as BitGo, the firm behind wBTC, partnered with BiTGlobal, a firm that Tron founder Justin Sun holds a stake in, users have become skeptical of it. Moreover, numerous DeFi protocols have removed support for the token. Sun has previously been accused of a lack of transparency around the projects he has overseen.
Popular stablecoin lending platform Sky, formerly MakerDAO, delisted wBTC as accepted collateral. Coinbase took advantage of the situation and launched its bitcoin wrapper—cBTC.
