Course Content
Tokenized Bitcoin on Ethereum Explained
Explain Like I'm Five (ELI5) Tokenized Bitcoin is a way to use bitcoin on other blockchains. But wait, isn’t Bitcoin great already? Indeed it is! It has a solid use case, and it already acts as a kind of public good. At the same time, its purposely limited features leave little room for further innovation. What else could we do with Bitcoin? Some Bitcoiners say we shouldn’t do anything in particular, and that’s reasonable. Then again, others believe we should find ways to use Bitcoin on other blockchains. And this is where we arrive at tokenized BTC on Ethereum. Why tokenize Bitcoin? Does this even make sense? How is tokenized Bitcoin created? Can you get your hands on tokenized BTC? Read more below if this interests you.
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Tokenized Bitcoin on Ethereum Explained
About Lesson
Before we start, there’s something we should clear to avoid confusion. If you’ve read our What is Bitcoin? article, you know that Bitcoin with an upper-case b is the network, and bitcoin with a lower-case b is the unit of account.
The idea behind tokenizing bitcoin is relatively simple. You lock BTC through some mechanism, mint tokens on another network, and use the BTC as a token on that network. Each token on the other network represents a specific amount of bitcoin. The peg between the two should be kept, and the process should be reversible. In other words, you can destroy these tokens, resulting in the “original” bitcoins getting unlocked again on the Bitcoin blockchain.
In the case of Ethereum, this means ERC-20 tokens that represent bitcoin. This allows users to make transactions on the Ethereum network denominated in bitcoin. This also makes bitcoins programmable – like any other token on Ethereum.
You can check the current total sum of bitcoin tokenized on Ethereum on btconethereum.com.

As of July 2020, there’s about 15,000 BTC tokenized on Ethereum. That may sound like a lot, but it’s negligible compared to the ~18.5 million that make up the circulating supply. However, this could be just the beginning.
It’s worth noting that sidechains and Layer 2 solutions like the Bitcoin Lightning Network or the Liquid Network also aim to tackle similar challenges. Fascinatingly, there’s more than ten times more bitcoin on Ethereum than there is in the Bitcoin Lightning Network. 

Even so, the competition between these different solutions isn’t that straightforward – it’s not a zero-sum game. In fact, many believe that they complement rather than compete with each other. Tokenized projects could increase the options that bitcoin holders have, while projects without tokens improve the overall infrastructure. This could result in more integration within the space, which would benefit the entire industry.

So, this all sounds interesting, but what’s the point of it? Let’s explore why we would want to tokenize Bitcoin in the first place.

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