kBTC Whitepaper

kBTC

Kraken Wrapped Bitcoin (“kBTC”) is a wrapped token issued by Kraken, backed 1:1 by native Bitcoin (“BTC”) held at Kraken Financial, a Wyoming-chartered SPDI (Special Purpose Depository Institution). Eligible Kraken users can deposit and withdraw kBTC at a 1:1 exchange rate with BTC, less any applicable fees.

kBTC will initially be a cross-network-compatible ERC-20 token on Ethereum and OP Mainnet, with plans to later expand support to additional networks, including non-EVM ecosystems.

Because kBTC is 1:1 redeemable for BTC, any kBTC holder’s expectation of profiting beyond this peg is unreasonable.

Secure and Transparent 1:1 Backing

Anyone can verify at any time that Kraken holds full Bitcoin reserves for kBTC. The BTC held at Kraken Financial can be found in the SPDI Custody Wallet, and the total supply of kBTC can be found in the kBTC OP Mainnet smart contract and the kBTC Ethereum smart contract.

The BTC  backing each kBTC token is securely stored in Kraken’s segregated reserves. As a state-chartered bank, Kraken Financial is mandated to attain certain standards of safety and security expected from a regulated financial institution, and digital assets are protected by advanced encryption and security protocols at all times.

How it works

Exchanging BTC for kBTC and vice versa

Eligible Kraken users can withdraw and deposit kBTC:

• To exchange BTC for kBTC a Kraken user initiates a withdrawal of BTC from their Kraken account, selects the relevant network, and an equivalent amount of kBTC is sent to the user's external withdrawal address. 
• To exchange kBTC for BTC a Kraken user initiates a deposit of kBTC to their Kraken account and an equivalent amount of BTC is deposited to their Kraken account.

kBTC exchanges are subject to deposit and withdrawal fees and minimums. 

Token Smart Contract Architecture

The kBTC smart contract has undergone thorough reviews by Kraken’s engineering and security teams. Additionally, it has been subjected to a third-party smart contract security audit from Trail of Bits to ensure its safety and reliability. Here you can view the kBTC OP Mainnet smart contract and the kBTC Ethereum smart contract. 

Kraken holds effective control over the token contract and its token management functions through a secure and Kraken-controlled wallet.

Compliance and Associated Risks 

Smart contract risk: kBTC exchanges rely on smart contracts. These contracts could have vulnerabilities or flaws that could be exploited, potentially leading to a loss of funds.

1:1 peg: There is no guarantee that the value of one kBTC will always equal the value of one BTC on third-party platforms. On such platforms, the price of kBTC will be determined by the market, and may diverge from the price of BTC depending on market conditions. 

Regulatory changes: Legislative and regulatory changes and requirements may adversely affect the value of, and ability to transact in, kBTC, including the ability to withdraw and deposit kBTC.

Third parties: kBTC is intended for use on various decentralized and open source blockchains or protocols over which Kraken has no control. If these blockchains or protocols suffer from technical issues, that may restrict users’ ability to transfer or use kBTC as intended. Additionally, in the event that any such blockchain or protocol experiences a “fork”, Kraken reserves the right to suspend withdrawals and deposits of kBTC temporarily or indefinitely, on little or no notice, while we determine, in our sole discretion, which fork we will support, if any. 

(For more details, please refer to the kBTC section of the Kraken Terms of Service.)