Internet Computer Issues ‘Liquid Bitcoin,’ for Faster, Cheaper BTC Transactions

ckBTC brings layer-2 capabilities to Bitcoin, while also ensuring greater security and decentralization than other BTC-pegged tokens, developers say.

AccessTimeIconApr 3, 2023 at 1:15 p.m. UTC
Updated Apr 3, 2023 at 8:57 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The Dfinity Foundation, a significant contributor to the development of the Internet Computer network, on Monday issued ckBTC – a liquid and cost-efficient “twin” token that is backed on a 1:1 basis with bitcoin (BTC).

The development brings layer-2 capabilities to Bitcoin, making it faster and cheaper to transact without compromising security. Layer 2s refer to a secondary framework or protocol that is built on top of an existing blockchain system.

By integrating directly with the Bitcoin network, ckBTC can be used on decentralized-finance applications on supported networks without relying on centralized bridging services, which are a major security concern.

“ckBTC means low transaction fees, speed, and, most importantly, no bridges,” Dominic Williams, founder of Dfinity, said in a note to CoinDesk. “This is a milestone in the Bitcoin journey, and the Dfinity Foundation is excited to see how projects building on the Internet Computer blockchain implement ckBTC and explore novel use cases.”

But while bitcoin integration unlocks opportunities, it also inherits the slow and expensive transaction times associated with the Bitcoin network. To combat that, Internet Computer has set fees on Liquid Bitcoin to just 0.0000001 ckBTC, or a few cents, at a value significantly lower than Bitcoin network fees.

Unlike wrapped tokens controlled by a centralized entity, ckBTC uses canisters – smart contracts for asset transfers – and doesn't require intermediaries or risky cross-chain bridges. Users deposit real bitcoin to their deposit address and receive an equal amount of ckBTC. Similarly, users can return ckBTC tokens to receive an equal amount of real bitcoin at a specified bitcoin address.

In February, Bitcoin network activity surged to a two-year high thanks to the popularity of the recently deployed Ordinals protocol – which allows non-fungible tokens to be stored on-chain.

Bitcoin layer 2 protocols such as Stacks have since surged as Stacks' STX tokens was one of the best performers in March, suggesting demand for similar protocols.

Edited by Parikshit Mishra.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.