TLDR:
- Kraken Launched kBTC, a Fully Backed ERC-20 1:1 Bitcoin Token
- kBTC is compatible with Ethereum and OP Mainnet networks
- Reserves are held by Kraken Financial, a Wyoming-licensed SPDI
- Chain booking verification is available for transparency
- Kraken plans to expand kBTC compatibility to additional networks
Kraken, a major cryptocurrency exchange, launched a new product called kBTC, a Bitcoin-backed ERC-20 token designed to enhance the utility of Bitcoin across different blockchain networks.
This move puts 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 cross-network compatible token that represents Bitcoin on the Ethereum and OP Mainnet (formerly Optimism) networks. Each kBTC token is collateralized 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 the value of Bitcoin.
Introducing $kBTC – an ERC-20 token fully backed 1:1 by Bitcoin, securely maintained by Kraken and always verifiable on-chain.
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 essential features of kBTC. Kraken emphasizes its commitment to on-chain reserve verification by allowing users to independently confirm the backing of their kBTC tokens.
Bitcoin reserves are held by Kraken Financial, a Wyoming-licensed Special Purpose Depository Institution (SPDI), which provides an additional layer of regulatory oversight and security.
At launch, Kraken allocated 100 Bitcoin (worth approximately $6.7 million) to support the initial supply of kBTC.
This is split into 80% on the Ethereum network and 20% on the OP Mainnet. The company plans to expand kBTC 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 packaged Bitcoin market. Coinbase and 21.co launched their respective packaged Bitcoin products last month, while BitGo’s WBTC remains the market leader with a market cap of $10 billion. This heightened activity reflects the growing importance of Bitcoin interoperability in the expanding DeFi landscape.
Kraken’s global head of growth and asset management, Mark Greenberg, stated that “the future is in the network” and that kBTC “enables users to put their BTC to work and accelerate DeFi adoption.” 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 packaged Bitcoin products.
For example, WBTC has 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 reputation for long standing 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 company. This audit involved a comprehensive examination of the customer’s code base and architecture to identify and resolve potential vulnerabilities.
Several projects have already partnered with Kraken to launch kBTC, including deBridge, Definitive, Gauntlet, ParaSwap, and Yearn. These partnerships aim to integrate kBTC into various DeFi applications and services, further expanding its usefulness.
Although Kraken has emphasized the potential of kBTC, it is important to note that at launch, no spot market 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.
