Blockchain
Threshold Network is now working with the cross-chain token protocol Wormhole in an effort to enable the easy movement of a tokenized representation of bitcoin (BTC) across some 20 blockchain ecosystems.
Wormhole introduced the integration to the Threshold community in mid-April, saying the goal was to help threshold bitcoin (tBTC) become the dominant bitcoin representative token in on-chain DeFi ecosystems. That agreement received strong community support and was fully approved on April 29 following a board vote.
tBTC is a Bitcoin-backed token that allows users to access the Ethereum and cross-chain DeFi ecosystem. Each tBTC token is fully backed by 1 bitcoin in reserve.
Wormhole integration allows tBTC to be transferred to both Ethereum Virtual Machine (EVM) chains, such as Arbitrum, Optimism, and Polygon, and non-EVM chains, such as Solana, Aptos, Sui, and Cosmos.
Using bitcoin on other networks previously required users to rely on centralized bridges, which increased risks for token holders. Bridges are blockchain-based tools that enable the transfer of tokens between different networks – a mechanism that posed huge security risks and fell victim to billions of dollars worth of exploits by 2022.
The Wormhole bridging plan is based on a new method of bridging ERC-20 tokens that allows efficient deployment of capital in Ethereum sidechains.
Instead of creating packaged tokens for each chain, soaking up valuable liquidity that can be used elsewhere, tBTC is minted on Ethereum.
A canonical token – i.e. one that is native to an ecosystem rather than packaged – is then deployed for each new chain. In this way, the tBTC supply remains intact and the risk is rounded up in local ecosystems.
“Wrapped Bitcoin has traditionally had a problem of centralization risk that has prevented strong, secure adoption of BTC in on-chain DeFi,” explained Wormhole Core Contributor Robinson Burkey in a note to CoinDesk.
The Threshold DAO is also expected to launch a cross-chain liquidity bootstrapping operation through the partnership with the potential to attract up to 26,000 BTC in deposits, a representative told CoinDesk via Telegram message.
Experienced liquidity providers will seed tBTC liquidity in key ecosystems in exchange for the option to purchase approximately $20 million worth of Threshold’s native t(T) tokens at or above spot price.