Wrapped Bitcoin (WBTC)

Basics

• Founded in:
• Mainnet release:
• Based in:
• This is a token, and not to be confused with the wider phenomena of wrapped tokens of BTC.
• BitGo is releasing an ERC20 stablecoin that is pegged to the value of Bitcoin, Wrapped Bitcoin (WBTC); the Ethereum based coin will be backed by 1WBTC:1BTC peg; every Bitcoin will be accounted for on a dashboard displaying addresses and balances, and users will be able to verify each Bitcoin held in custody on the blockchain via Etherscan.

• It's clearly not as 'pure' as the real BTC, with the collateral being centrally custodied and minted, requiring KYC/AML and the whole project being governed by a DAO of industry partners, but the use cases for BTC grow exponentially, now that it can also live synthetically on Ethereum, and open finance gets a lot more liquidity to build upon.

History

BitGo announced it would spin out/share the custody with a different partner that is connected to Justin Sun (8-2024), giving enough keys to BiT Global to make wBTC centralized. This led to MakerDAO disabling (16-8-2024) wBTC within it's protocol plus Coinbase to anounnce cbBTC.

Tech

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].
• Built on:
• Programming language used:

Transaction Details

• Capacity (TPS):
• Latency:

Oracle Method being used

• BitGo is using Chainlink to audit Wrapped BTC (1-10-2020).

Roadmap

• Can be found [Insert link here].

Audits

• Bug bounty program can be found [insert here]. None according to Blockchain Security DB (29-6-2020), which does show 1 audit (10-2018).

Usage

• Is live (5-2-2019) on Ethereum as an ERC20 token under the $WBTC ticker. It already counts 72 BTC in custody (Bitgo holds them, verifiable onchain) and an equivalent amount of minted WBTC is being traded on various decentralized exchanges against ERC20 pairs.

• It passed (11-3-2020) Lightning Network by amount of BTC locked up.
• 68% of all WBTC is locked in Maker (24-5-2020)
• From The Defiant (13-5-2020):

"Despite the extended lead, WBTC stagnated for months after experiencing an initial rise to prominence in Spring of 2019. WBTC started to see a resurgence following the Aave rebrand in late January 2020 - likely as the money markets protocol offered under-the-radar cheap borrowing for keen BTC holders. But now Maker - the biggest DeFi protocol in terms of value locked - is bringing WBTC back into the spotlight."

• Has 73% market share of all BTC on ETH (6-10-2020).

Projects who participate

• Initiated by Kyber Network, REN and BitGo and followed by Set, Kyber Swap, Airswap, Compound, , DDEX, Maker, Dolomite, OmiseGo, Dharma, Prycto, IDEX, Gnosis, RadarRelay, Blockfolio, SwitcheoNetwork, bZx, Gopax, Loopring, EthFinex, dYdY, imToken, CoinGecko, Hydro, Uniswap, The Ocean, Nuo, HitBTC, Grapefruit Trading, REUM, BambooRelay

Competition

WBTC vs tBTC

• From the Token Economy newsletter:

"Trustless BTC on Ethereum. tBTC is just like WBTC, but doesn't require any centralizing, censorable features (aside from having only one oracle for the price-feed for now). So in reality, it's nothing like WBTC, as it is also fully redeemable in a trustless way."

Following comes from DeFi Rate:

	WBTC	TBTC
Ecosystem Actors	Merchants, Custodians, WBTC DAO	Bonded Signers
Model	Consortium	Decentralised
Fully Collateralized	Yes	Yes
Verification	On-chain	On-chain
Deposit Size Requirement	N/A	1 BTC
Censorship Resistant	Maybe	Yes
Lock-up Period	None	6 months
KYC/AML	Yes	No
Fees	Custodian + Merchant + Network Fees	Custodian + Network fees

"WBTC Benefits

Given that TBTC spec was only released last week (8-2019), WBTC’s biggest benefit is the first-mover advantage. WBTC has already amassed nearly 600 BTC along with its recent integration into Compound Finance. With this, investors can now borrow or lend WBTC in an entirely trustless manner. In addition, unlike TBTC, the WBTC system is rather robust allowing any deposit size with minimal lock-up periods.

WBTC Drawbacks

First and foremost, users looking to mint or redeem WBTC must pass KYC/AML. While KYC/AML is not a bad thing, having this requirement does add friction to the system and can draw some critiques from the crypto community. It is important to note that while users who wish to mint or burn WBTC through merchants and custodians must pass KYC/AML, users are still able to transact and hold WBTC without KYC/AML once it is in circulation.

The last major drawback is the system’s reliance on the consortium model. Users will have to trust a handful of crypto institutions to mint, burn, and custody the tokens. While no single institution controls the entire system, the consortium model does not completely fill the core values of crypto and decentralized architectures.

TBTC Benefits

The biggest benefit to TBTC over WBTC is the elimination of trust within the overarching system. Rather than relying on merchants and custodians, TBTC relies on math and game theory (i.e. incentives) to drive the ecosystem. With this, users looking to mint TBTC or redeem BTC do not have to complete KYC and AML as the entire process is executed in a trustless and pseudonymous manner.

TBTC Drawbacks

The TBTC spec was released early last week and is still in the early phases of development. As such, many of these drawbacks generally derive from the fact that the system is untested and hasn’t had the opportunity to mature yet.

Regardless, the biggest drawback for TBTC is the 6-month lock-up requirement and the strict limitations on Bitcoin deposit sizes. As it stands today, users who wish to mint TBTC by locking BTC can only do so in intervals of 1 BTC. Therefore, anyone looking to mint multiple BTC must go through the minting process multiple times. Moreover, this strict deposit requirement creates fairly high capital requirements as anyone with <1BTC is unable to participate.

Conclusion

While both TBTC and WBTC both offer highly transparent systems with verifiable on-chain reserves, each system has its trade-offs. It is important to note that TBTC is not live yet (8-2019) and is still in testing phases, but it will be interesting to see how these two assets continue to evolve over the coming years.

If you’re interested in getting a full understanding of the TBTC or WBTC system, you can review the official tBTC spec here and the wBTC website and whitepaper here."

Again, all the above came from DeFi Rate.

Pros and Cons

Cons

Counterparty Risks

• From this blog by Set (25-5-2020):

"WBTC, or ‘Wrapped Bitcoin’, is similar to WETH but with one key difference — it is 100% custodial and centralized. The WBTC initiative is led by Kyber Network in partnership with BitGo. The short of it is that every 1 WBTC that is minted on the Ethereum network is backed by 1 BTC in a vault controlled by BitGo. The WBTC smart contract also has a pause function which allows its central operator to freeze WBTC assets at any time.

If this function was called to freeze WBTC deposited into Sets as collateral, or if the vault housing the BTC that backs WBTC is hacked, the expectation is that any Sets collateralized by WBTC would become worthless."

Team, Funding, Partnerships, etc.

Team

• Full team can be found [here].

Partners 

• Is a partner with DeversiFi, according to their website (4-6-2020)