TLDR:
Kraken launched kBTC, a fully backed 1:1 Bitcoin ERC-20 token
kBTC is compatible with Ethereum and OP Mainnet networks
Reserves are held by Kraken Financial, a Wyoming-chartered SPDI
On-chain verification of reserves is available for transparency
Kraken plans to expand kBTC compatibility to additional networks
Kraken, a leading cryptocurrency exchange, has launched a new product called kBTC, a Bitcoin-backed ERC-20 token designed to enhance Bitcoin’s utility across different blockchain networks.
This move places Kraken in direct competition with other major players in the wrapped Bitcoin market, including BitGo’s Wrapped Bitcoin (WBTC), Coinbase’s cbBTC, and 21.co’s 21BTC.
kBTC is a fully backed, cross-network-compatible token that represents Bitcoin on the Ethereum and OP Mainnet (formerly Optimism) networks. Each kBTC token is backed 1:1 by an equivalent amount of Bitcoin held in Kraken’s custody. This allows Bitcoin holders to participate in decentralized finance (DeFi) activities on these networks while maintaining exposure to Bitcoin’s value.
Introducing $kBTC – an ERC-20 token fully backed 1:1 by Bitcoin, held securely by Kraken and always verifiable onchain.
More possibilities.More functionality.More transparency.
Let’s take a closer look ⤵️ pic.twitter.com/VammHbyJKm
— Kraken Pro (@krakenpro) October 17, 2024
Transparency and security are key features of kBTC. Kraken emphasizes its commitment to on-chain verification of reserves, allowing users to independently confirm the backing of their kBTC tokens.
The Bitcoin reserves are held by Kraken Financial, a Wyoming-chartered Special Purpose Depository Institution (SPDI), which provides an additional layer of regulatory oversight and security.
At launch, Kraken has allocated 100 Bitcoin (worth approximately $6.7 million) to back the initial supply of kBTC.
This is split with 80% on the Ethereum network and 20% on OP Mainnet. The company plans to expand kBTC’s compatibility to additional blockchain networks in the future, including non-EVM (Ethereum Virtual Machine) ecosystems.
The introduction of kBTC comes at a time of increased competition in the wrapped Bitcoin market. Coinbase and 21.co launched their respective wrapped Bitcoin products last month, while BitGo’s WBTC remains the market leader with a $10 billion market cap. This heightened activity reflects the growing importance of Bitcoin interoperability in the expanding DeFi landscape.
Kraken’s Global Head of Asset Growth and Management, Mark Greenberg, stated that “the future is on-chain” and that kBTC “enables users to put their BTC to work and accelerates the adoption of DeFi.” This sentiment underscores the broader industry trend of making Bitcoin more accessible and useful within various blockchain ecosystems.
The launch of kBTC also follows recent debates surrounding the custody arrangements of other wrapped Bitcoin products.
For instance, WBTC faced scrutiny due to a joint venture between its custodian, BitGo, and a Hong Kong-based custody platform with connections to Tron co-founder Justin Sun. Kraken aims to differentiate itself by emphasizing its long-standing reputation in the industry and its commitment to transparency.
To ensure the security of kBTC, Kraken had the ERC-20 smart contract audited by Trail of Bits, an external security firm. This audit involved a comprehensive examination of the codebase and client architecture to identify and address potential vulnerabilities.
Several projects have already partnered with Kraken for the kBTC launch, including deBridge, Definitive, Gauntlet, ParaSwap, and Yearn. These partnerships aim to integrate kBTC into various DeFi applications and services, further expanding its utility.
While Kraken has emphasized the potential of kBTC, it’s worth noting that at launch, no spot markets for kBTC will be available on the Kraken exchange. However, users will have the option to redeem their kBTC for Bitcoin at any time, providing flexibility in how they manage their assets.
