ckBTC brings layer-2 capabilities to Bitcoin, providing faster and cheaper transactions on the Internet Computer network, while also ensuring greater security and decentralization than other BTC-pegged tokens.

The Dfinity Foundation, a significant contributor to the development of the Internet Computer network, on Monday issued ckBTC — a liquid and cost-efficient “twin” token that is backed on a 1:1 basis with bitcoin (BTC).

The development brings layer-2 capabilities to bitcoin, making it faster and cheaper to transact without compromising security. Layer 2s refer to a secondary framework or protocol that is built on top of an existing blockchain system.

By integrating directly with the Bitcoin network, ckBTC can be used on decentralized finance (DeFi) applications on supported networks without relying on centralized bridging services, which are a major security concern in the broader crypto ecosystem.

“ckBTC means low transaction fees, speed, and, most importantly, no bridges,” said Dominic Williams, founder at Dfinity, in a note to CoinDesk. “This is a milestone in the Bitcoin journey, and the Dfinity Foundation is excited to see how projects building on the Internet Computer blockchain implement ckBTC and explore novel use cases.”

However, while bitcoin integration unlocks a plethora of opportunities, it also inherits the slow and expensive transaction times associated with the Bitcoin network. To combat this, Internet Computer has set fees on Liquid Bitcoin to just 0.0000001 ckBTC, or a few cents, at a value significantly lower than Bitcoin network fees.

Unlike wrapped tokens, controlled by a centralized entity, ckBTC uses canisters — smart contracts for asset transfers — and does not require intermediaries or risky cross-chain bridges.Users deposit real bitcoin to their deposit address and receive an equal amount of ckBTC. Similarly, users can return ckBTC tokens to receive an equal amount of real bitcoin at a specified bitcoin address.

In February, Bitcoin network activity surged to a two-year high thanks to the popularity of the recently deployed Ordinals protocol — which allows non-fungible tokens (NFT) to be stored on-chain.

Bitcoin layer 2 protocols such as Stacks have since surged – with STX tokens becoming one of the best performers in March, suggesting demand for similar protocols.