$1B in Wrapped Bitcoin now being audited using Chainlink's 'Proof of Reserve'

Wrapped Bitcoin custodian BitGo has adopted Chainlink's Proof of Reserve mechanism in order to boost the transparency and auditability of the tokenized asset for DeFi protocols.

The functionality, which is currently live on testnet, enables Ethereum-based dApps to completely automate the burden of auditing wBTC. The move comes as the amount of Wrapped Bitcoin on Ethereum approaches $1 billion in value, or the equivalent of over 92,500 BTC. The mechanism negates the need to rely on manual off-chain processes such as audit reports.

It streamlines the process in a trustless and censorship resistant manner which gives further credibility and security to the tokenized version of Bitcoin.

Wrapped Bitcoin custodian BitGo announced the Chainlink collaboration on Oct. 1, adding this meant DeFi applications could now receive definitive on-chain proof regarding the fully backed collateralization of wBTC. The Proof of Reserve contract will access a decentralized Chainlink oracle to check the balances of BitGo custody wallets for wBTC every ten minutes, which is the average time between BTC blocks.

Chainlink nodes will continually monitor the contract off-chain, but only update it on-chain when events change the balance such as the minting or burning of wBTC. User funds can also be protected - for example, a money market can check wBTC collateralization before executing a lending or borrowing action.

"This feature can be especially beneficial for decentralized applications that utilize wBTC as collateral to secure other digital assets."

Chainlink protocol co-founder, Sergey Nazarov, told Forbes;.

"I think the concept of Proof of Reserve generally is really about proving that an underlying asset somewhere is in a certain state. And that proof is actually very fundamental to how financial systems work."

Bitcoin in its native form doesn't work well with DeFi which is largely Ethereum based.

Of this total, which has increased by 970% over the past three months, wBTC accounts for 76%..