Cryptocurrency exchange Kraken has launched its own tokenized version of Bitcoin representing BTC holdings stored by the company.

On Oct. 17, Kraken officially introduced Kraken Wrapped Bitcoin (kBTC), a token backed 1:1 by an equivalent amount of Bitcoin BTCUSD held in Kraken’s custody.

The new ERC-20 token is interoperable with networks, including Ethereum and OP Mainnet (formerly Optimism), and can be used in decentralized applications (DApps), Kraken said.

“With kBTC, we’re bringing the power of Bitcoin to new networks, underpinned by the trust and security expertise Kraken has established over the last decade,” the exchange stated, adding:

Kraken encourages users to inspect kBTC’s onchain reserves 

Kraken said the Bitcoin backing kBTC is held at Kraken Financial, a Wyoming-chartered special purpose depository institution.

The firm added that the kBTC ERC-20 smart contract was audited by Trail of Bits, a security firm that has worked on major projects like Worldcoin.

“This audit, which kBTC passed, involved a detailed examination of our codebase and client architecture, aimed at identifying and addressing any potential security vulnerabilities,” Kraken stated.

One can verify kBTC’s onchain reserves by checking onchain data with links provided by Kraken, including links to the kBTC OP Mainnet smart contract, kBTC ETH smart contract and the BTC custody address.

What is a wrapped Bitcoin token?

Wrapped crypto assets like Wrapped Bitcoin WBTC are tokens backed one-to-one by an underlying asset, usually native to another blockchain network or platform.

In wrapped tokens, the original asset is “wrapped” into a digital vault, while a newly minted token is created to transact on other platforms.

Wrapped tokens allow non-native assets to be used on any blockchain, enabling interoperability between networks.

For example, Bitcoin can be accessed on the Ethereum blockchain by using tokens such as WBTC, which might be useful to users of apps that don’t support the original Bitcoin blockchain like MetaMask wallet.

Launched in 2019, Ethereum-based WBTC was one of the first wrapped tokens introduced and is the second-largest wrapped cryptocurrency, with a market cap of nearly $10 billion, according to CoinGecko.

Lido’s Wrapped Staked Ether (wstETH) is the largest wrapped cryptocurrency at the time of writing, with a market value of roughly $11 billion.