(Bloomberg) -- For almost as long as there have been digital currencies, a rivalry has existed between Bitcoin and Ethereum. Now, a project called tBTC is seeking to forge a truce between the two by allowing Bitcoin owners access to the financial applications that run on Ethereum.
The idea is to let Bitcoin users turn their coins into tBTC, a token that can run on the Ethereum blockchain, allowing them to use tBTC as collateral to earn interest, trade using leverage or access enhanced financial privacy applications, all without having to sell their Bitcoin. Then the tBTC can be changed back to Bitcoin. The effort, expected to begin on April 27, raised $7.7 million in a second wave of financing from investors including Fenbushi Capital, according to a statement Thursday.
Joining Bitcoin and Ethereum will allow the blockchain economy to grow more fully, said Steven Becker, president of MakerDAO, an online platform for creating digital dollars, or so-called stablecoins, and generating loans secured by crypto tokens -- all run by a blockchain-based computer program.
“tBTC is brilliant because ultimately it links two major concepts together,” Becker said in an interview. Allowing Bitcoin and Ethereum to work together, to be interoperable, is “how all these networks are going to come together to create the on-chain economy.” MakerDAO users will likely decide in the coming weeks if tBTC can be used as collateral in its system, Becker said.
tBTC got its start when Matt Luongo wanted to buy a house. The project lead of tBTC said his wife suggested that he sell his Bitcoin to fund the new home, yet Luongo wanted to use the Bitcoin as collateral for a loan. After searching around, he couldn’t find a way to collateralize his stash.
“It really bothered me that I was talking to all these people when all I wanted to do was access the U.S. dollar value of my Bitcoin,” he said in an interview. He knew of Ethereum projects like MakerDAO, yet there was no way to use Bitcoin for loans via MakerDAO.
Bitcoin will be converted to tBTC using an off chain protocol called Keep, Luongo said. Keep announced Thursday that it raised $7.7 million in a private token sale, which will mostly go to fund tBTC development. The project previously raised $12 million in 2018 from investors including Andreessen Horowitz and Polychain Capital.
The rivalry between Bitcoin and Ethereum goes back partly to Vitalik Buterin. The creator of Ethereum was first and foremost a staunch supporter and advocate of Bitcoin. He co-founded Bitcoin Magazine and wrote hundreds of articles to help thousands of new adherents understand what the new digital technology could accomplish. Yet he grew frustrated with the limits of Bitcoin, and created Ethereum to allow users to create any type of program that would live atop a global system of distributed computers.
Ethereum is now the second-largest blockchain by market value after Bitcoin. In the process, many hardline Bitcoin users feel Buterin sold out their values. The acceptance of some Bitcoin users will be hard to find for an Ethereum-based project.
“It’s going to be an extraordinarily healthy debate,” MakerDAO’s Becker said.
The vast majority of people tBTC’s Luongo has spoken to in the Bitcoin world say tBTC is a good idea, yet there is a loud minority of Bitcoiners who don’t want anything to do with another coin or blockchain, he said.
“It’s been really interesting, he said. “We’re hitting people’s funny bone.”
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