Tokenized Bitcoins on Ethereum: Part 4

This article is the last out of four parts. If you want to read about a detailed comparison of different tokenizing projects on Ethereum, you can go back to part three. This final part will summarize the research and give insights into deploying a custom tokenizing app.

Evaluation of Projects

Looking at the backing type, all tokenizing solutions excluding Synthetix rely on IOU, meaning that actual Bitcoins are locked to gain usability of personally owned Bitcoins on Ethereum. Viewing the governance of the remaining approaches, only Ren is fully decentralized from the beginning, followed by Keep Network and pTokens, which plan to move from federated- to decentralized governance in the future. Others probably remain a trusted federation or centralized. Even though centralized institutions seem like safe custody and have no price feeds, the type contradicts blockchain principles in general.

Within three months after their release, Ren Project has caught up to more than a third of WBTC holdings and may overtake them as the first fully decentralized project running tokenized Bitcoins on Ethereum. Keep Networks had a rough start but is now live again and might become an opponent to Ren. Compared to Ren Project, it is still the more complicated solution facing fees and liquidation but offering much more scalability to tokenize huge chunks of Bitcoins. Both can grow within the developer space using it in autonomous software and get a lot of application support in the long run.

The imTokens and HBTC projects will probably remain as long as they are used in their big exchange wallets with less potential to grow. Leaving Synthetix for crypto stock exchange traders and WBTC as the first tokenizing project and current leader on Ethereum, where individuals can lock and redeem with good conscience involving KYC and AML processes.

Building a Tokenizing App

As mentioned, Ren is pushing ahead for a permissionless solution running on Ethereum’s main network. That’s why I chose them to build my application. It utilizes the web3.js package of JavaScript, which lets you interact with the Ethereum blockchain and tries to be the groundwork for developing the next generation of cross-chain interaction. They also offer great assistance to make the entry with tokenizing as easy as possible.

Ren guides you through compiling their smart contract with Solidity and developing a JavaScript application on their site. They offer two APIs: GatewayJS for Ren’s seamless transition and implementation, including a pre-built frontend. Secondly, RenJS is a light implementation that customization with its core functionalities. Both libraries are mainly built for decentralized applications within the browser. There is currently no possibility of getting Web3 running on native smartphone devices. We will use the Ethereum Kovan blockchain because Ren Project has already set up its smart contracts and test network.

While GatewayJS is the easy but heavy-weighted way of tokenizing, RenJS focuses on developers who want specific customization and efficiency. GatewayJS offers already implemented local storage, an excellent user interface, animations, and parallel tokenizing transactions, which users can directly import to your web application. Because we want to experiment with the software and add our corporate design, the light-weighted version sounds more fitting for us.

I chose the software environment React for the user interface, as it is one of the leading standard libraries to build browser interfaces with JavaScript. It offers excellent functionality to combine code sequences with interface elements. React also comes with terminal commands and listener functionality, enabling programming to see changes directly while the application is running. The architecture of the app can be seen in the following figure.

Application Layout for React

After planning the rough layout, Ren Project does provide a guide for RenJS that we can follow along. At the time of writing, I used their first version. After deploying our smart contract, we can integrate the Ren functionality. After that, I also added transaction caching and a custom design with pulsing elements on pending processes. Here you can see a picture of the core application window.

Application Showcase

Custom Application Showcase

The app has the main features of deposit, withdrawal, and check balance but can also output the current transaction state, additional metadata, and download the receipt after the process is finished. Users can enable all those other functionalities by using the advanced view on the right menu. If you want to follow along, you can visit the GitHub Repository to see the codebase of this prototype.

Conclusion

Cross-chain tokenizing technologies, in general, are currently in tremendous growth, and there are different solutions for covering various use cases- either directly to be used by enthusiasts or implemented within wallets as backend software.

Services will need decentralized tokenization for applications that run autonomously and attract Bitcoin holders. Such decentralized projects are just in their starting area, defining new concepts on bypassing central custodians, lowering fees, or making them scale well. The research and comparisons have shown that Ren Project is currently the best practice solution for autonomous software development. Others either lack decentralization, natural Bitcoin backing, permission-less interaction, or network stability on price fluctuations. Their advantages are reflected in the market growth.

At the moment, all projects try to gain trust from the first wave of users- and therefore use a lot of collateral. There will be new fraud-proof schemes to reduce the security collateral within the future, requiring only a glimpse of what they currently need. More supported chains and app platforms for programmers to build on should also come along after a solid user base grows and more extensive networks are reached. Such wide-range concepts are already in the making: Ren Project leaps forward again by not only providing compatibility to big chains like Bitcoin, Bitcoin Cash, Zcash, or Ethereum but also allowing developers to build their custom bridges based on their open-source software development kit called Multichain.

Developing prototypes like the one provided is always an excellent way to compare technical differences and find fitting solutions. This strategy also creates a modularity mindset, utilizing itself in code, making programs more efficient and comfortable while always relying on the best-in-case software.

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I’m a software developer active in the blockchain space, currently doing my master thesis while working at LUKSO.

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Felix Hildebrandt

Felix Hildebrandt

I’m a software developer active in the blockchain space, currently doing my master thesis while working at LUKSO.

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