There was a time when the market only had one blockchain. Since the creation of Bitcoin, the cryptocurrency space has been flooded with innovative blockchain technologies that seek to solve old problems while tackling (and sometimes creating) new ones.
The second generation of blockchain technology was sparked by Ethereum and the world is now entering the third generation of blockchain technologies, heralding the start of the Web 3.0 era.
Does this mean that Bitcoin and Ethereum are dead?
Certainly not.
With each bull run, the value of Bitcoin and Ethereum has risen to new highs. The Ethereum blockchain keeps its dominance among Layer 1 chains by shifting its core technologies to compete with newer blockchains, whereas Bitcoin keeps its relevance due to its perceived value and price in the eyes of investors.
Because the core technology underlying Bitcoin can be defined by small incremental changes, people have devised a method of bridging the gap by transferring the token to newer blockchain technologies via a process known as cross-chain bridging.
Let's look at what this procedure entails.
Cross-Chain Bridging
The problem with having multiple blockchain technologies is that there cannot be a single chain that rules over all others. In a multi-blockchain future, the blockchains must coexist. This means that assets and currencies must be transferred from one blockchain to another, a process known as cross-chain bridging.
A typical cross-chain bridge sends funds to a protocol where they are locked into a contract, or in the case of the Avalanche Bridge, burned and then minted on the destination chain. This provides the user with funds equivalent to a parallel asset on the destination blockchain.
For example, if you transfer your Bitcoin to Avalanche, you will be locking BTC and minting BTC.B, a 1:1 backed asset that serves the same functions as BTC with the added benefit of being able to use the BTC.B within the Avalanche DeFi ecosystem.
With most popular blockchains introducing cross-chain bridging to increase their share of the crypto market, there are a lot of contenders for the proverbial Iron Throne. Currently, the most popular amongst these are BTCB by Binance and BTC.B by Avalanche. Let’s take a closer look at how they operate and which one’s better for you.
What Is Bitcoin BEP2 (BTCB)?
Bitcoin BEP2, more popularly known as BTCB, was introduced by Binance to increase the popularity and usability of its blockchain. It’s a stablecoin in nature and was launched by Binance in June 2019. BTCB is a crypto-backed stablecoin supported by BTC reserves. Usually, most stablecoins are pegged to something outside the cryptocurrency system. However, BTCB is pegged to BTC’s price.
BEP2 is an abbreviation for Binance Chain Evolution Proposal 2. It's essentially a requirement for tokens to function in the Binance ecosystem.
For now, Binance holds the user’s Bitcoin in reserve, thereby centralizing the reserves of BTCB. This goes against the decentralization philosophy that is the essence of cryptocurrency and blockchain. A process called atomic swaps is used instead to transfer cryptocurrencies from two different blockchains without a third party, removing the need for a centralized exchange like Binance.
According to Binance, the process they use is better and more transparent, “Transparency is ensured through the Proof of Assets webpage, where you can verify the current supply for all locked and issued assets on the public blockchain.”
What Is BTC.B?
Just like BTCB is BTC’s bridge to bring over Bitcoin to the Binance blockchain, BTC.B is the bridge that Avalanche uses. Avalanche announced its new support for Bitcoin using the Avalanche bridge on June 22, 2022.
The action aims to unlock half a trillion dollars of value on the Bitcoin network for use within the Avalanche ecosystem.
The purpose of bridging is to allow people who are holding BTC to invest in the opportunities that DeFi protocols on the Avalanche blockchain present while retaining their BTC. Avalanche also introduced a new application called Intel SGX to further facilitate cross-chain Bitcoin transfers.
Today, if you want to bridge your BTC over to the Avalanche network, you will first need to install the Core wallet browser extension.
How and Why You Should Bridge BTC in Core
Core is a free and non-custodial browser extension for the Avalanche ecosystem. It is a complete Web3 system in its own right, with a wallet, explorer, bridge, subnets, and dApps all integrated into a single system. It is a lot more user-friendly than traditional dApps and wallet systems.
At present, you can only bridge BTC and other Ethereum based assets to or from the Avalanche blockchain using Core.
The process is simple.
To bridge any coin with Core, choose the network you want to move your assets from. Currently, supported networks are Ethereum and Bitcoin. Select the amount that you want to bridge, and click transfer. Your BTC will soon appear on the Avalanche blockchain inside the built-in portfolio manager of Core.
Network fees: known as BTC transaction fees for the BTC bridge.
Bridge toll: the fee charged by the bridge to the user.
Core aims to allow users to manage their assets on the Ethereum or Bitcoin blockchain as well as the Avalanche blockchain directly from Core.
Final Thoughts: BTCB vs. BTC.B
It is well-known that although the Bitcoin token itself is very popular, but the blockchain underlying BTC has much to be desired. As mentioned before, there are two main blockchains where you can make the most out of your BTC: Binance and Avalanche. The question is, when will you start to put your BTC to work?
Cryptocurrency markets are highly volatile and investors would be wise to do their own research and never risk more money than you can afford to lose.
