Today, the Provable Things (formerly Oraclize) team announced the launch of pTokens on the Ethereum mainnet.
pTokens aim to unlock cross-chain liquidity for the entire crypto market by making all cryptocurrencies and blockchains compatible with decentralized finance (DeFi) tools.
The first pToken to be launched on the Ethereum blockchain is pBTC, an ERC20 token representing Bitcoin on the Ethereum network, which is already integrated on the Bancor Network and Kyber Network DeFi platforms.
As a result, it is already possible to mint pBTC tokens by locking BTC and use the pBTC withing decentralized finance tools.
The conversion from BTC to pBTC takes place in a cryptographically secure, fully verifiable and transparent environment.
As explained in detail in the post on Medium, Bitcoin is by far one of the most widely used cryptocurrencies in the world, and pBTC bring BTC liquidity to the dApps on Ethereum, providing a whole new range of decentralized finance use cases, both for Ethereum and Bitcoin itself.
Founder of Provable Things, Thomas Bertani, said:
“For Decentralized Finance to be successful, liquidity is key. Bitcoin is the largest cryptocurrency by market cap and the majority of industry applications and finance products are based on the Ethereum network. But with over 2000 currencies, this limits what consumers can do and the liquidity of platforms using individual cryptocurrency networks. The missing link for DeFi is cross-chain interoperability – the ability of cryptocurrency to move between blockchains seamlessly. pTokens will unlock the value of the entire $250+ billion cryptocurrency market, letting liquidity flow instantly and fluidly between different blockchains, expanding the world of DeFi and its adoption”.
Bancor’s Head of Growth, Nate Hindman, commented:
“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. 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”.
DeFi platforms can, for example, be used to earn money. This is achieved by locking cryptocurrencies in order to provide liquidity for pools that lend them out in exchange for interest. However, as these platforms are mainly based on the Ethereum blockchain, it is very difficult to do this with bitcoin.
But thanks to tokens like pBTC, it becomes possible to take advantage of these platforms even using bitcoin, with the certainty that it is always possible to recover the BTC when desired, simply by withdrawing them from the platform on which they have been locked.
This could also lead to a wave of new users and liquidity for DeFi platforms on Ethereum, considering that so far there are still few BTC locked in DeFi instruments.
Admittedly, compared to a year ago, they have gone from about 800 to almost 1,800, but they only correspond to a little more than 16 million dollars, compared to almost 1 billion dollars in total, of which more than 650 million in ETH and more than 80 million in DAI.
Considering that as of today on the Bitcoin blockchain there is no ecosystem similar to the DeFi ecosystem on the Ethereum blockchain, and given that BTC’s market capitalization is almost 7 times that of ETH, it is indeed to be expected that the volume of BTC locked in decentralized financial instruments can increase even more, provided that there are suitable instruments for this purpose.
For now, pBTC is a bridge between Bitcoin and Ethereum, but pTokens can support virtually any blockchain.
Besides pBTC there are already other pTokens, i.e. pEOS and pLTC, but for now they are still only on the testnet. In the future also pEOS and pLTC will be brought on the Ethereum mainnet, whereas other pTokens will be created to bring for example ETH and DAI on other blockchains.
pTokens are minted in a one-to-one ratio with respect to the asset they are collateralized with, so they will always have a value equal to the underlying cryptocurrency. Moreover, they can be reconverted into the underlying asset at any time, always with a 1:1 ratio.