Bitgo to be working with the Chainlink team to streamline the auditability of WBTC reserves
To scale WBTC’s reliability and support its growing demand, Bitgo to be working with the Chainlink team to streamline the auditability of WBTC reserves.
WBTC’s $1 billion+ in Bitcoin will now gain additional security using #Chainlink‘s Proof of Reserve capability. We’re thrilled to be working with @BitGo to enable greater transparency & therefore more usability for WBTC as a form of collateral across #DeFi:https://t.co/Zd53kmLYZ5
— Chainlink – Official Channel (@chainlink) October 1, 2020
To boost the transparency and auditability of Wrapped BTC (WBTC), the most liquid and utilized wrapped form of Bitcoin in the market, BitGo has adopted Chainlink’s Proof of Reserve mechanism. Now live on testnet, this Chainlink functionality enables decentralized applications on Ethereum to fully automate the burden of auditing the BTC value custodied by BitGo, in a trustless and censorship resistant manner, removing the need to rely on manual off-chain processes like reading audit reports, according to the announcement on October 2.
The WBTC Proof of Reserve reference contract uses a decentralized Chainlink oracle to check the balances of BitGo’s WBTC custody wallets every ten minutes (the average time between Bitcoin blocks). Whenever a deviation is spotted beyond a certain defined threshold (e.g. 1%), Chainlink oracles will push an on-chain update to the reference contracts with the new balance. In this regard, Chainlink Nodes will constantly monitor the contract off-chain, but only push on-chain transactions when events happen like the minting and burning of WBTC tokens, which result in changes to the reserves.
If the collateralization reported by the Proof of Reserve contract deviates from the minted amount of WBTC, applications can employ customized logic to swiftly and safely protect user funds. For example, a money market protocol can check WBTC collateralization before taking a borrowing/lending action, which either accepts or denies a transaction based on the oracle report. This feature can be especially beneficial for decentralized applications that utilize WBTC as collateral to secure other digital assets. By automating the auditing process and increasing the transparency in WBTC collateralization, user trust increases across the market and DeFi applications have additional options for protection against unexpected events.
Based in Palo Alto, California. BitGo was founded in 2013 by Mike Belshe and Ben Davenport. The company offers a multisignature bitcoin wallet service, where keys are divided among a number of owners to manage risk. Generally, BitGo wallets have three keys: one held by BitGo, and two held by the wallet’s owner. In October 2018, Bitgo raised US$15 million in venture capital funding from Goldman Sachs and Mike Novogratz’s Galaxy Digital.
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