Ethereum Cements Its Role As Bitcoin's Main Sidechain When The Tokenized BTC Has Crossed $1B Notional
Developing sidechains for bitcoin is seeing a great competition. Eventually, Ethereum has seen the best outcome. Given here are the details.
Adding Sidechains To Bitcoin
A number of bitcoiners advocated the use of sidechains in order to relieve the main chain’s duties years ago when the bitcoin network started suffering from higher fees and congestion. During the last year, however, they never realised that the Ethereum network would solidify its role as Bitcoin’s main sidechain.
A number of proponents said that sidechains and off-chain solutions would help as five years ago bitcoiners relentlessly argued over scaling the Bitcoin blockchain. Thereby launched were a number of solutions similar to Blockstream’s Liquid and the RSK network. Helping alleviate the issues were many supporters assuming those two sidechains combined with the Lightning Network.
Expecting to see the Ethereum network takeover as BTC’s main sidechain, were none of these bitcoin enthusiasts. When the investment partner at Paradigm, Arjun Balaji tweeted about Ethereum’s massive growth in this area, the situation was discussed this week.
As Balaji wrote on Twitter, Ethereum has emerged as the first working Bitcoin sidechain growing from ~0 to 91.8K BTC over the last year. From centrally issued (WBTC), trust-minimised (tBTC) to purely synthetic (sBTC), users have choice across the trust spectrum as he notes.
Responding to Balaji’s tweet and saying it was more like 20 months as opposed to a year was Financial commentator and cryptocurrency lead at Cinnober, Eric Wall. Sharing his tweet which he had sent back when the wrapped Bitcoin (WBTC), the project officially launched in January 2019 was Wall. He further stated that big day in crypto as Ethereum comes now as an official bitcoin sidechain.
A number of people didn’t agree with his assessment, so Wall further described his perspective of the side chain definition when Wall tweeted this statement in 2019.
Many Different Sidechains
Wall tweeted last year that a sidechain comes as a different chain using the same native asset as another chain where this asset is locked/unlocked on the respective chains via a 2-way peg. Examples of these are [RSK], [Paul Sztorc’s] Drivechain [and] Blockstream’s Liquid along with Ethereum which is another example.
Not agreeing with Wall’s definition, the Ethereum proponent Anthony Sassano said: it’s not a sidechain to Bitcoin as Ethereum doesn’t rely on the security of the Bitcoin blockchain. Coming as simply a tokenised representation of BTC is WBTC.
Responding to Sassano Wall stated that it just makes the assumption that the bitcoins that get locked on the mainchain can be unlocked again when the Liquid functionaries redeem them as the Liquid sidechain doesn’t rely on the security of Bitcoin mainnet either.
WBTC had initially announced locking 65 BTC into the protocol as the Wrapped Bitcoin team considered the first lock-in to be a milestone when Wall tweeted those statements. There is approximately 107,101 tokenised BTC or $1.1 billion using today’s exchange rates circulating on the ETH chain at the time of writing.
All About WBTC
As the Wrapped Bitcoin project is the largest issuer of tokenised bitcoins today, WBTC’s meagre 65 BTC start is nothing compared to the growth the project has seen to-date. According to Dune Analytics data, Wrapped Bitcoin captures over 72% of the tokenised bitcoin in existence with 77,162 WBTC to-date.
renBTC (20,525), hBTC (4,810), sBTC (3,528), imBTC (1,390), and pBTC (136) are those following WBTC. As the tBTC project is relaunched on Tuesday additionally crypto proponents are gearing up to witness the first trustless BTC-ETH bridge.
The project’s blog announcement reads that tBTC is the fully audited and open source when launched with unprecedented security measures in place and ready to be used at tbtc.network.
Currently at 0.510% of the capped supply is the current number of BTC held on Ethereum out of the 21 million that will be ever issued.
On various decentralised exchanges like Curve.fi and Uniswap and centralised exchanges as well are tokenised bitcoins traded. The sum of bitcoins held on Ethereum will likely continue to grow with the re-introduction of the tbtc.network.
Starting at 100 BTC in the first week, the token tBTC will have a graduated supply cap. The project creators detail that each week, the contracts thereby loosen the deposit restriction based on a pre-committed schedule.
Starting developing sidechain solutions years before the massive tokenised BTC migration to Ethereum, were the other contenders like RSK and Blockstream having to go a long way catching up to the network effect the ETH chain currently holds.
The Liquid Network has 2,594 BTC in circulation whereas the RSK sidechain has a circulating supply of 270 rBTC. Close to 110,000 Bitcoin in total is the supply of tokenised BTC on Ethereum, RSK, and Liquid combined. With 97.4% of all the tokens combined, the tokenized bitcoins on the Ethereum network eclipses these projects.