Bridging Bitcoin and Ethereum

2020 will be remembered as the year blockchain interoperability became real. Drawn by the allure of Ethereum’s booming DeFi ecosystem, Bitcoin holders have ported more than half a billion dollars worth of Bitcoin onto Ethereum in the year.

The behavior is indicative of what is likely to be the primary use case for interoperability for the foreseeable future. It won’t be about porting assets to and from different blockchains. It will be about porting assets to and from Ethereum. Ethereum is the center of the decentralized financial universe. Cryptoassets are simply flowing to where they will be best utilized.

Many interoperability protocols are live but not fully built out. But what is clear is there’s real demand for interoperability and a big opportunity. Bitcoin alone provides more than $200 billion in capital that could potentially enter Ethereum’s DeFi ecosystem.

Building the Bridge Between Bitcoin and Ethereum

The two simplest solutions aiming to trustlessly bridge cryptoassets to Ethereum are RenVM and Keep Network. In particular, both are currently focused on bridging Bitcoin onto Ethereum. The high level idea is simple; Ren and Keep act as decentralized custodians that receive bitcoins, then mint corresponding pegged ERC-20 bitcoin tokens on Ethereum. Nodes on the Ren and Keep networks receive fees for their services.