BitGo, Bitcoin’s encapsulated trustee, has adopted Chainlink’s evidence of reserve mechanism to improve the transparency and audit of assets encoded in the DeFi protocols.
A feature currently running on the test network allows Ethereum-based dApps to automate the burden of wBTC revision. This move comes when the number of bitcoins encapsulated in Ethereum approaches 1 billion dollars, or the equivalent of over 92,500 BTC.
This mechanism eliminates the need to rely on offline manual processes such as audit reports. This simplifies the process in an unreliable and anti-censorship way, making the token version of Bitcoin more reliable and secure.
BitGo, the custodian of Bitcoin, announced a partnership with Chainlink on October 1, adding that this means that DeFi apps can now receive final proof from the chain regarding wBTC’s fully validated guarantees.
The contract confirming the reservation will go to the decentralized Oracle Chainlink to check the balance of the BitGo Guardian wallet for wBTC every ten minutes, which is the average time between BTC clusters. If there is a deviation from a certain threshold, Oracle will send an update to the chain to indicate the new balance.
Chainlink nodes will constantly monitor off-chain nodes, but only update them in the chain when events change balance, such as coin burning or wBTC. User funds can also be protected – for example, the money market can check WBTC guarantees before proceeding with a lending or lending procedure. Announcement added;
“This feature can be especially useful for decentralized applications that use wBTC as security to protect other digital assets.”
This generally affects the increase in user confidence in the asset and the protection against unforeseen events in decentralized financial markets. Sergey Nazarov, co-founder of the ChainLink Protocol, told Forbes;
“I think the concept of Proof of Provision is really about proving that the underlying asset is somewhere in a particular situation. This evidence is actually very important for the way financial systems work. ”
Use the financial crisis in 2008 as an example of how there is a gap between the actual underlying value of an asset and the market.
Bitcoin in its original form is not suitable for DeFi, which is heavily dependent on Ethereum. Packing them or converting them into ERC-20 tokens has become extremely popular this year, as profitability growth opportunities emerged almost daily.
According to btconethereum.com, 125,300 BTCs are currently coded for use in Ethereum, or the equivalent of $ 1.33 billion. Of this amount, which has increased by 970% in the last three months, wBTC accounts for 76%.