Bitcoin and blockchain technology have given people a lot of utility in financial services like exchanging money without intermediaries and having a digital store of value. However, with Ethereum’s release and all kinds of various applications available, the possibilities with finance have expanded even more. People started wondering, wouldn’t it be great if we could use our Bitcoin with all its value with the apps on the Ethereum blockchain? That is how Wrapped Bitcoin (WBTC) came to be.
Wrapped Bitcoin (WBTC) is an ERC-20 token built on the Ethereum blockchain that represents the value of Bitcoin. It allows people to transfer the value of Bitcoin and leverage applications that Ethereum provides
The prominent uniqueness of WBTC is that it is not decentralized as regular Bitcoin but is controlled by three companies, Ren, Kyber, and BitGo.
WBTC is also created differently from Bitcoin. When a user wants to have some WBTC, they send their Bitcoin to the merchant and go through the KYC process, and in return, they get WBTC. The process for reverse is that their WBTC is burned, and they get their Bitcoin back.
As being a token that represents the value of Bitcoin on the Ethereum blockchain, WBTC can be used on decentralized exchanges, crypto lending services, and other Ethereum decentralized finance (DeFi) applications. Besides that, it has all the utilities that original Bitcoin has and it can be used as store of value, means of exchange for goods and services and cross border payments method.
At the time of writing (May 16th, 2022), WBTC’s price is $29,634. The current Market Cap ranking is #13, with a market cap of $8.4B.
The price of WBTC follows the price of Bitcoin by a margin of a few dollars, meaning that any significant price movement that Bitcoin makes is transferred over to WBTC. WBTC has hit the same all-time high price as Bitcoin in the previous year.
There is no predetermined schedule for WBTC issuance. Instead, WBTC is automatically minted or burned whenever users purchase or sell their tokens for Bitcoin via a system of merchants and custodians.
Because Bitcoin always backs wrapped Bitcoin at a 1:1 ratio, the number of tokens in circulation directly depends on the amount of Bitcoin reserves in the WBTC network. As of May 2022, that number was just over 284K tokens.
WBTC has become pretty popular because it allows the users of Bitcoin to transfer that value over to the Ethereum blockchain and participate with it in various protocols and applications.
The primary way people buy their WBTC is through centralized exchanges because they offer the ability to purchase them with credit\debit cards, which most people prefer.
Although significantly more complicated, the second way is through decentralized exchanges such as Uniswap. Decentralized exchanges usually require users to already have some cryptocurrencies in their wallets to buy other cryptos. Since Uniswap is built on the Ethereum blockchain, you can purchase WBTC there.
Finally, it can be purchased easily through a broker app such as our Veli App, where you can get your hands on some WBTC in just a few taps on the screen.
The Wrapped Tokens project, of which WBTC is a part, was not started by a single person but rather by three organizations: BitGo, Kyber Network, and Ren.
BitGo is a provider of an institution’s digital asset custody, trading, and financial services. BitGo is one of the initial custodians of WBTC, as well as one of its creators. This entity is in possession of WBTC tokens as well as the keys required to create more.
Kyber Network is an on-chain liquidity mechanism that allows multiple cryptocurrency currencies and DeFi apps to be integrated.
Ren, like Kyber, focuses on cross-blockchain integration of bitcoin assets and DeFi applications with products like RenBridge, RenVM, and others.
WBTC has a reasonably small community, being present only on Twitter, with around 10k followers.
WBTC is supported by many prominent companies in the blockchain industry. The most notable ones are Aave, Compound, Maker, Ren, and DeversiFi.
WBTC has not had any outstanding legal issues that are known.
WBTC is the most popular representation of Bitcoin on other networks. Let us look at some numbers.
WBTC’s main competitors are renBTC and Bitcoin BEP2.
renBTC is also a wrapped version of Bitcoin that is also hosted on the Ethereum blockchain. The main difference between them is that a centralized company mints WBTC, and renBTC is minted through a Smart Contract, a decentralized way. They are both backed 1:1 with Bitcoin assets.
Bitcoin BEP2 is a token that represents Bitcoin on the Binance chain. The main difference is that transactions performed on the Binance chain are faster than on Ethereum, making it more suitable for more active network users. It is too backed 1:1 with Bitcoin in reserves.
Here are some additional numbers to illustrate this competition.
WBTC | renBTC | Bitcoin BEP2 | |
On what network? | Ethereum (Erc-20) | Ethereum (Erc-20) | BNB Chain |
Minting type | Centralized custodian – BitGo | Minted with a trustless smart contract – decentralized process | Issued by Binance exchange |
Transactions per second | 15 | 15 | 55-60 |
Time needed to confirm a transaction | 6 min | 6 min | <5s |
Average transaction fee | 15$ | 15.00$ | 0.31$ |
Market cap | $11b | $366.6m | $4.1b |
Total number of wallet addresses | 50k | 5k | 460k |
Total number of daily active users | 778 | 100 | 233 |
24h volume | $228.96m | $42.15m | $23m |
Launch date | 2019 | 2020 | 2019 |
Average growth rate | 80.79% | 80.79% | 80.79% |
As with any other asset class, there are risks involved when it comes to investing. Since there are many kinds of cryptocurrencies, risks can be grouped into two categories – general risks that apply when investing in cryptocurrencies and risks that only apply to specific assets.
We have prepared a guide that addresses general cryptocurrency investing risks and offers tips on how to mitigate them, while risks that only apply to specific assets are addressed directly in the coin guides such as this one.
Website: https://wbtc.network/
Twitter: https://twitter.com/WrappedBTC
Wrapped tokens, like WBTC, are a solution to make assets interchangeable and representable on Ethereum and other blockchains. Global liquidity, increased fractional ownership, smart contract programmability, and reduction in transaction fees are key benefits of tokenization. WBTC is the first such token, enabling decentralized applications easy access to Bitcoin. All transactions, contracts, and audits are publicly viewable to maintain transparency and encourage trust in the network.
The framework also provides a way for multiple institutions in the cryptocurrency space to perform distinct roles to get past common issues faced by asset-backed tokens.
The risk sides are also involved with all the benefits of wrapped tokens on Ethereum and other networks. Ethereum scalability, centralization, and governance centralization are the risk sides of these projects. WBTC is the most significant wrapped token today by market capitalization.
