BitGo on October first announced that it is adopting Chainlink’s Proof of Reserve mechanism to automate the auditing of its Wrapped Bitcoin (WBTC) custodial reserve. This move is to help decentralized applications utilizing WBTC for Decentralized Finance (DeFi) protocols such as lending to automate the process of auditing the BTC value custodied by BitGo.

One of the essences of blockchain technology is hinged on transparency and the removal of censorship. BitGo is fulfilling these goals with its WBTC since it is the largest and the most used Bitcoin Backed token on the Ethereum Blockchain:

“To boost the transparency and auditability of Wrapped BTC (WBTC)… BitGo has adopted Chainlink’s Proof of Reserve mechanism. Now live on testnet (and soon mainnet), this Chainlink functionality enables decentralized applications on Ethereum to fully automate the burden of auditing the BTC value custodied by BitGo, in a trustless and censorship resistant manner, removing the need to rely on manual off-chain processes like reading audit reports.”

Chainlink’s oracles are created to help connect smart contracts to off-chain data sources so they can function fairly and as designed. With Chainlink’s oracles, DeFi protocols can receive constantly updated metrics about the actual amounts of WBTC in BitGo’s custody. Oracles from Chainlink queries BitGo’s Bitcoin custody wallets for balances every ten minutes (which is the Bitcoin’s Block times) and updates WBTC Proof of Reserve Reference contract whenever there is a change. Other DeFi protocols can easily query the WBTC Proof of Reserve Reference contract to prove that every WBTC is backed by an equal amount of Bitcoin.

This move essentially removes any form of error that may arise with a manual track, trace, and auditing of smart contracts by DeFi applications. The need to serve multiple customers at once will be improved with the proof of reserve reference contract by BitGo. BitGo stated:

“For example, a money market protocol can check WBTC collateralization before taking a borrowing/lending action, which either accepts or denies a transaction based on the oracle report. This feature can be especially beneficial for decentralized applications that utilize WBTC as collateral to secure other digital assets. By automating the auditing process and increasing the transparency in WBTC collateralization, user trust increases across the market and DeFi applications have additional options for protection against unexpected events.”

Chainlink’s proof of reserve reference contracts is being utilized by many other custodial wallets to automate the process of audit. It has been successful in helping many blockchain-based organizations and protocols link their products to metrics that they might never have dreamt of having before. With lots of utilization of its solutions, Chainlink not only proves its viability but its greatness as a chain that links all blockchain.