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Threshold Network Goes Live With Wormhole to Bridge Bitcoin to 20 Blockchains
Using bitcoin on other networks previously required users to rely on centralized bridges, which increased risks for token holders.
May 11, 2023, 1:10 p.m.
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Threshold Network is now working with cross-chain token protocol Wormhole in an effort that hopes to allow the easy movement of a tokenized representation of bitcoin to some twenty blockchain ecosystems.
Wormhole proposed the integration to the Threshold community in mid-April, saying its objective was to help threshold bitcoin (tBTC) become the dominant bitcoin representative token in on-chain DeFi ecosystems. That agreement won strong community support and was fully approved on April 29 after a governance vote.
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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 held in reserve.
The Wormhole integration will allow tBTC to be transferred to both Ethereum Virtual Machine (EVM) chains, such as Arbitrum, Optimism and Polygon, and non-EVM chains like 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 allow the transfer of tokens between different networks – a mechanism that opened up massive security risks and fell victim to billions of dollars worth of exploits in 2022.
The Wormhole bridging plan relies upon a new method for bridging ERC-20 tokens that allows the efficient deployment of capital to Ethereum sidechains.
Instead of creating wrapped tokens for each chain, which soak up valuable liquidity that could be used elsewhere, tBTC will be minted on Ethereum.
A canonical token – i.e. one that is native to an ecosystem rather than wrapped – will then be deployed for each new chain. This way, the tBTC supply remains intact and risk is corralled in local ecosystems.
“Wrapped Bitcoin has historically had a problem of centralization risk that has prevented strong, safe adoption of BTC in on-chain DeFi,” explained Wormhole Core Contributor Robinson Burkey in a note to CoinDesk.
It is also expected that the collaboration will involve the Threshold DAO launching a cross-chain liquidity bootstrapping operation with the potential to attract up to 26,000 BTC of deposits, a representative told CoinDesk over Telegram message.
Experienced liquidity providers will seed tBTC liquidity in important ecosystems in exchange for the option to purchase approximately $20 million worth of Threshold’s native t (T) tokens at or above the spot price.
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