Vitalik Buterin expressed his opinion on all tokens representing bitcoin on the Ethereum (ETH) blockchain.
I'm worried about the trust models of some of these tokens. It would be sad if there ends up being $5b of BTC on ethereum and the keys are held by a single institution.
— vitalik.eth (@VitalikButerin) May 21, 2020
What Vitalik criticizes is their centralization, not the project itself, considering that a few months ago he expressly invited the community to develop something like this.
I'm pro-interoperability. But interoperability can be accomplished with light clients and merkle proofs; a lot of the stuff seems too complex for its own good. Years of theorizing, still no *good* BTC <-> ETH cross chain DEXes….
— vitalik.eth (@VitalikButerin) February 22, 2020
The comment arises from the observation of a graph comparing the Bitcoins (BTC) locked on Ethereum with those locked on Liquid’s blockchain, showing that Ethereum is 2.5 times more used than the competitor.
Buterin points out that the model behind some of these ERC20 tokens is worrying because it puts in the hands of a few a huge amount of liquidity, both for better and for worse: in fact, this way all bitcoins are transferred into a smart contract and then converted into tokens.
The concerns are well-founded because there are some protocols that are not completely decentralized, think for example to wBTC (Wrapped Bitcoin) which has a confederate system and which requires a KYC (Know Your Customer) procedure; recently it has also become collateral for the DAI stablecoin.
Or we can also observe the recent failure of tBTC, which couldn’t deal with the mainnet launch, despite the fact that the model was more decentralized than wBTC.
However, not all bitcoin-pegged tokens are bad, as a matter of fact, there are some solutions that offer more decentralized and cheap solutions in terms of management of both signatures and the smart contracts, for example pTokens, which have a certified and protected hardware that doesn’t allow to be tampered with from the outside, and that can also be easily used on the EOS blockchain.