Cross-Chain Collaboration: tBTC, Wormhole Boost Bitcoin Presence in DeFi Ecosystems

Ethereal scene depicting secure token transfer across blockchain networks, intricate DeFi ecosystem interconnections, tBTC surrounded by 20 ethereal chains (Arbitrum, Optimism, Polygon, Solana, Aptos, Sui, Cosmos), warm golden light symbolizing safety and collaboration, intertwined tokens like vines, dynamic brushstrokes, hopeful and futuristic atmosphere.

Threshold Network and cross-chain token protocol Wormhole have teamed up to enable the smooth movement of tokenized representation of bitcoin (BTC) across almost twenty blockchain ecosystems. Their objective is to make threshold bitcoin (tBTC) the leading bitcoin representative token in on-chain DeFi ecosystems. This collaboration saw strong community support and was approved in late April following a governance vote.

tBTC is a Bitcoin-backed token, allowing users to access the Ethereum and cross-chain DeFi ecosystem. Each tBTC token is entirely backed by one bitcoin held in reserve. The Wormhole integration will open the door for tBTC to be transferred to multiple Ethereum Virtual Machine (EVM) chains, such as Arbitrum, Optimism, and Polygon, and non-EVM chains like Solana, Aptos, Sui, and Cosmos.

Previously, using bitcoin on other networks required users to depend on centralized bridges, which posed significant risks for token holders. Bridges are blockchain-based tools that facilitate the transfer of tokens between various networks, but with this ease came immense security risks, resulting in billions of dollars being exploited in 2022.

Wormhole’s bridging plan offers a fresh approach for bridging ERC-20 tokens, allowing efficient capital deployment to Ethereum sidechains. Instead of creating wrapped tokens for each chain, which would consume valuable liquidity, tBTC will be minted on Ethereum. A native token will then be deployed on each new chain, ensuring the tBTC supply remains intact and risk is confined to local ecosystems.

According to Wormhole Core Contributor Robinson Burkey, “Wrapped Bitcoin has historically had a problem of centralization risk that has prevented strong, safe adoption of BTC in on-chain DeFi.” This collaboration aims to address these concerns while fostering a more secure environment for bitcoin adoption.

Additionally, the collaboration is expected to involve Threshold DAO launching a cross-chain liquidity bootstrapping operation, which could potentially attract up to 26,000 BTC in deposits. Experienced liquidity providers will seed tBTC liquidity in vital ecosystems in exchange for the option to purchase approximately $20 million worth of Threshold’s native T tokens at or above the spot price.

This partnership between Threshold Network and Wormhole aims to streamline the use of tBTC and bolster its presence in on-chain DeFi ecosystems. However, it remains to be seen if this collaboration can address long-standing concerns regarding centralization and security risks in the world of decentralized finance.

Source: Coindesk

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