Ethereum competitor Avalanche announced new support for native Bitcoin (BTC) through its bridge solution built on its crypto wallet Core. Following the news, its native token AVX spiked higher, outperforming major digital assets like Bitcoin and Ethereum in the past 24 hours.
BTC wrapped on Avalanche
Ava Lab – the foundation behind the Avalanche smart contract platform – has launched a new bridge solution that allows users to tokenize their BTC as an Avalanche-based asset called BTC.b. The newly introduced “encapsulated” BTC could make the Avalanche DeFi ecosystem available to users of the Bitcoin network. The official blog post said:
“This enables Bitcoin holders to directly access extensive earning and yield opportunities on top DeFi protocols, while still maintaining BTC on their portfolio.”
The current BTC bridge is only available on Avalanche’s Web3 wallet. The post noted that Core Chrome Extension is a custom product that supports cross-chain bridging, allowing access to other blockchain-based assets on the Avalanche Network.
“The Core Wallet Extension was custom built to support Bitcoin and the Avalanche Bridge and to handle the technical problems of linking Bitcoin and EVM chains within a wallet.”
Similar to how wrapped BTC – a type of tokenized Bitcoin living on the Ethereum blockchain – was introduced to ETH through smart contracts, Avalanche would also lock each Bitcoin received as a deposit and mint an equivalent amount of BTC.b adapted to its network. The labs said the bridge would not expose users to counterparty risk and trust issues like wrapped Ethereum-based BTC did.
To bridge BTC to the layer one blockchain, users need to process two types of fees, including 1) BTC network fees and 2) fees that the bridge charges to the user (also known as Bridge Toll).
According to the post, the bridge will allow bitcoin holders to access Avalanche subnets and other blockchain networks like Ethereum.
The Avalanche bridge was launched last year to bridge assets between the Ethereum and Avalanche networks. Compatible with the Ethereum Virtual Machine (EVM), applications and Dapps on Ethereum could thus be easily transferred to Avalanche. Meanwhile, users can stake Ethereum-based assets on Avalanche’s DeFi protocols for earning yields.