This is it!
Following a successful series of testnet launches, we’re officially migrating pTokens to the mainnet.
pBTC is hitting the Ethereum blockchain to unlock cross-chain liquidity and begin our journey into making Decentralized Finance (DeFi) universally compatible with every cryptocurrency.
What are pTokens aiming to solve?
DeFi is a rapidly growing industry, recently surpassing $1 billion in total locked value. Over the past 12 months, the Decentralized Financial ecosystem has experienced impressive growth both in terms of financial products available and interactions with each protocol.
According to Dune Analytics, February 2020 was an all-time high month for decentralized exchanges (DEXs) on Ethereum with $372 Million traded.
The DeFi movement has also contributed to the development of innovative financial services that could not exist in the more traditional financial industry, such as Flash Loans.
Yet despite its accelerating popularity, current liquidity cannot accommodate the constant flow of new tools and platforms.
This creates a huge bottleneck and hinders its growth. With the majority of the industry built upon — and therefore limited to — the Ethereum network, this makes hundreds of DeFi DApps inaccessible to non-Ethereum crypto holders.
Webelieve that in order for Decentralized Finance to be successful, liquidity is key.
Every blockchain is a walled garden, locking out other cryptocurrencies and locking in their own liquidity.
Our founder told Coindesk that the missing link for DeFi has always been “cross-chain composability” — the ability of cryptocurrency to move between blockchains seamlessly.
pTokens are the first tool to enable DeFi composability for any and every blockchain and token. They make DApps accessible to anyone using cryptocurrencies, without having to sell their Bitcoin, Litecoin, EOS or any other blockchain asset they hold.
This aims to unlock the value of the entire $250+ billion cryptocurrency market, letting liquidity flow instantly and fluidly between different blockchains, expanding the world of DeFi.
The “p” in pTokens stands for provable, portable, pegged.
Today we begin by launching pBTC, making Bitcoin compatible with the Ethereum network. This provides instant and frictionless access to Ethereum’s DeFi world for every bitcoin holder. Or, in other words, it opens up Bitcoin liquidity to DeFi dApps.
Bitcoin accounts for over 60% of the whole cryptocurrency market (source: coinmarketcap.com) with an approximate average of $40 Billion traded daily over the last 30 days.
The pTokens system aims to unleash such liquidity into Ethereum’s decentralized financial market and boost the overall growth of the ecosystem.
pBTC on ETH creates opportunities for a variety of DeFi projects, from decentralized exchanges to lending platforms to derivatives on Ethereum.
How does the pTokens solution work?
The pTokens bridge follows a simple approach to enable the cross-chain movement of assets. Purposefully simple in its design, the Bitcoin ↔ Ethereum bridge features two light clients, one for the native blockchain (Bitcoin) and another for the host blockchain (Ethereum).
It is our belief that when managing funds, it’s important to have a strong technological solution. Keeping the cross-chain bridges simple allows for easier auditability of the system and implies a lower risk of technical flows.
The pBTC pToken on Ethereum makes use of three main components:
- A P2SH (pay to script hash) Bitcoin address
- An Ethereum ERC-777 smart contract
- Two light clients (Bitcoin + Ethereum) housed within an enclave
As for the Ethereum component, pBTC is implemented as an ERC-777 token. This is an ERC-20 compatible token standard developed leveraging OpenZeppelin’s standard smart contract.
When compared to other popular “wrapped” cryptocurrencies in the market, we have developed a system which aims to bring as much liquidity, and create unparalleled market-making opportunities, as possible.
pTokens are pegged 1:1, so each blockchain can tap into each other’s markets, with the underlying asset (BTC) injecting its liquidity into the Ethereum ecosystem.
Holders of BTC can instantly convert their coins with an incredibly fast peg-in/peg-out mechanism. They can use their pBTC to start interacting with every Ethereum DApp, including breakthrough DeFi tools like decentralized lending platforms where they can earn interest on their loaned crypto assets.
pBTC can be converted back to BTC at its current value and at any time. This eliminates the need to sell currencies, a taxable event, in order to interact with Ethereum based applications.
This automated minting and redeeming of pBTC allows users to enter and exit the market continuously — an effortless process which creates frictionless liquidity for DEXs, DApps and their users.
pTokens are minted using a cryptographically secure system which makes the whole process transparent, fully-auditable and automated. In fact, the issuance and burning of pBTC (along with their respective deposit and release of BTC on the Bitcoin blockchain) is handled automatically by an enclave within a Trusted Execution Environment.
But how does it compare to other cross-chain composability solutions?
We began examining our unique solution in a new series, considering how it compares to other projects taking on the same challenge of bringing liquidity and interoperability to blockchains.
In Part I, we analyzed tBTC and WBTC, a well-known “wrapping” technique.
How do pTokens compare to other cross-chain interoperability solutions?
Part I: Power of the “P”
pBTC & synthetic BTC — How do they compare?
In Part I of this series we began comparing cross-chain composability solutions WBTC and tBTC. As we develop and refine…
Unchaining blockchain liquidity
When it comes to tokenizing assets, liquidity is as just important as a strong technological solution. The pTokens system is integrated with liquidity pools Bancor Network and Kyber Network, making pBTC available on these platforms.
Both Bancor Network and Kyber Network are on-chain liquidity protocols enabling decentralized token exchanges on Ethereum. While presenting different technical implementations, they both rank among the top decentralized exchanges on Ethereum.
Integrating the pTokens system with such liquidity protocols means a more liquid pBTC pair. Thanks to its frictionless design, pBTC opens up to market makers willing to operate on these decentralized markets.
Our liquidity partners over at Bancor are just as excited about offering pBTC to their users.
Nate Hindman, who is Head of Growth at Bancor, told Coindesk “If pBTC becomes a key on-ramp for bitcoin users to access DeFi services on Ethereum and other chains then staking BTC in the pBTC liquidity pool on Bancor could generate attractive fees and rewards for users staking their pBTC on Bancor.”
He also shared his thoughts with us — “We’re thrilled to see pBTC give Bitcoin users access to DeFi protocols like Bancor. With the newly launched pBTC liquidity pool on Bancor, any user can now stake their pBTC, generate fees from trades on Bancor, and ultimately collect their earnings in BTC.”
“The process for setting up a new liquidity pool on Bancor, or staking in an existing pool, is self-service, permissionless and requires no minimum, so we look forward to numerous pTokens liquidity pools launching in the near future, opening up Bancor staking to many more chains.”
Learn how easy it is to stake on Bancor by following this handy guide.
Our pTokenized Bitcoin (pBTC) asset is also integrated with Kyber Network, therefore making Bitcoin’s liquidity available to all Kyber users.
The pBTC reserve smart contract on Kyber aims to provide added value for its users as it levels up the game for the protocol to keep increasing its trading volumes. Because of its automated peg-in and peg-out processes, pBTC makes it easier for traders and market makers to operate in such a decentralized environment.
Shane from the Kyber team also let Coindesk know what he thought of this new integration partnership; “Bitcoin is among the most widely held and used cryptocurrencies. We are glad to support the pBTC initiative to bring Bitcoin liquidity to Ethereum DApps, enabling a whole new world of exciting decentralized finance (DeFi) use cases for both the Bitcoin and Ethereum ecosystem.”
For now pTokens are the bridge between Ethereum and Bitcoin, but can support any blockchain asset. New pTokens such as pEOS and pLTC have already been deployed in a test environment and will also soon be available on Ethereum mainnet. The system will soon apply to other assets, bringing pETH, pBTC and pDAI to other blockchains.
While this launch is a great first milestone for the team and for the broader development of this technology, it’s still Phase Zero. Over time, the administration of the system will become more decentralized and its governance passed into the hands of the community, who will help shape the path ahead for pTokens.
What is Phase Zero? Phase Zero is the initial version of the pBTC on ETH bridge making tokenized Bitcoin assets available on the Ethereum mainnet. During this phase, the system is not on autopilot. This is to enable the development team to seamlessly improve the system and upgrade the bridge when and if required.
The pTokens solution is committed to this progressive decentralized approach, which sees the transition to community governance happening in steps, rather than “diving in headfirst”. This initial, not fully decentralized version aims to first create a secure and stable system, whose governance will then become incrementally decentralized.
We will be releasing more details on this road to decentralization in the coming months!
For any blockchain project looking to integrate pTokens into their infrastructure, we have also built a pTokens JS library.
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