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Wrapped Bitcoin (WBTC)

Wrapped Bitcoin (WBTC) is an Ethereum-based token () that is backed 1:1 with , enabling BTC holders participate in Ethereum's (DeFi) ecosystem. It is a digital asset that bridges the gap between decentralized and traditional finance. WBTC has the same economic properties as , providing users with a store of value, investment opportunity, and liquidity. The launch of WBTC allows users to benefit from both the and networks. [1][2][3]

History

The Wrapped Tokens project, of which WBTC is a part, was founded by three organizations: , , and (previously Republic Protocol). [4][5][6]

Launched on October 26, 2018, the aim of the project is to build an ERC-20 token that enables new application use cases for on . WBTC is an attempt to standardize bitcoins according to ERC-20 which allows Ethereum developers, orders, and other parts of the ecosystem direct exposure to liquidity by serving as a 1:1 pegged coin. [8][10]

, co-founded in 2013 by Mike Belshe, is an institutional digital asset custody, trading, and financial services firm. It is one of the developers of WBTC and is the original custodian of the tokens and keys needed to mint them. [7][4]

is an on-blockchain liquidity protocol designed to facilitate the integration of cryptocurrency tokens and DeFi applications. Established in 2017 by Loi Luu, Victor Tran, and Yaron Velner, Kyber Network is based in Singapore and is a partner of Ren. Kyber Network also serves as a merchant on the WBTC network and is responsible for minting and burning WBTC tokens to maintain a 1:1 ratio of tokens to reserves. [6][4]

is a company founded in 2017 by Taiyang Zhang and Loong Wang that focuses on cross-blockchain integration of cryptocurrency assets and through solutions such as RenBridge and RenVM. [4][9]

In January 2019, the initial WBTC whitepaper was released and the token was launched with eight merchants: , Dharma, ETHfinex, GOPAX, , Prycto, , and Set Protocol facilitating -to-WBTC conversions. Shortly after the release, many other prominent organizations within the space began to participate in the community effort by becoming launch partners and supporting the adoption of WBTC through holding tokens, participating in the governance committee, or spreading awareness of the token. Those who committed to the Partnership included , , Dharma, , , , , Hydro Protocol, Set Protocol, , Blockfolio, and Prycto. [5]
wiki

Early Market Cap Growth

Around early August 2020, Wrapped Bitcoin (WBTC) saw a surge in value, as its  grew to over $230 million. Part of the immense growth was related to the growing interest in the space, as it continued to garner substantial returns on investments. [12][13]

Record Breaking Mint

On October 14, 2020, CoinList set a new record for the largest mint of wrapped bitcoin in a single day, with 4,997 WBTC, worth $57.1 million at the time. This surpassed the previous record of 4,093 WBTC, worth $44.7 million, set by . [14][15]

Technology

Minting

Minting consists of the generation of new wrapped tokens. The process is initiated by merchants via a transaction that authorizes custodians to generate new tokens for the merchants on . The merchant then sends the custodian native , and the custodian waits for 6 block confirmations, the most secure, on .  Once the transaction is complete, the custodian generates a new transaction on the network, which enables the minting of a 1:1 equivalent of a new WBTC. [16][5]

Burning

Burning consists of acquiring for WBTC tokens. This is done through verified merchants who create "burn" transactions using the WBTC smart contract. After 25 block confirmations on the chain, the specified amount of WBTC is taken from the merchant's balance and the custodian sends BTC back to the merchant's address. KYC and AML procedures must be completed by users and merchants prior to performing an 'atomic swap' or working through a trusted exchange, where the user receives and the merchant receives their WBTC tokens. [5][16]

WBTC Ecosystem

Custodian

Custodians are institutions that store crypto assets. In the case of WBTC, BitGo is responsible for custodying Bitcoin.

Merchant

The institution or party to which wrapped tokens will be minted to and burnt from. Merchants play a key role in the distribution of the wrapped token. In the case of WBTC, this will be played initially by Kyber and Ren. Each merchant holds a key to initiate the minting of new wrapped tokens and the burning of wrapped tokens.

Users

Users are holders of WBTC. Users can use WBTC to transfer and transact like any other ERC20 token in the Ethereum ecosystem.

WBTC DAO Member

WBTC DAO is the governing body that is responsible for contract changes and the addition/removal of custodians and merchants. This governance body helps decentralize the network via multisig contracts which require all members to reach a consensus before initiating a change. [5][17]

Governance

A wrapped token contract is governed by a multi-signature contract requiring signatures from DAO members to add or remove them. All custodians and merchants are DAO members, but other institutions are eligible for membership without a custodian or merchant role. An "M of N" signature is used in the contract, with M being the required number of signatures and N being the total number of members. The values of M and N are mutually decided between members with a focus on both security and ease of adding and removing members. [5]

Utility

WBTC can be used to increase liquidity in the ecosystem, including and financial applications. It facilitates liquidity in , enabling Bitcoin to be used for token trades. WBTC also standardizes Bitcoin to the ERC-20 format, enabling the use of for Bitcoin. This facilitates the development of smart contracts that include Bitcoin transfers. [1]

With Wrapped Bitcoin based on ERC-20 blockchain technology, exchanges, wallets, and crypto-based payment apps only need to handle an node, which makes it easier to manage transactions occurring in the ecosystem. [18]

WBTC DAO Migration

On November 20th, 2022, Victor Tran, CEO of made a pull request on WBTC's GitHub [20] on the migration of the WBTC DAO to a new multi-signature contract. [19] According to Victor, as part of the modifications, the migration coordinated by BitGo and will see that the new Multisig has 13 signers as opposed to its previous 18 signers.

11 of its previous signers including companies like , MarkerDAO, , and others were removed and replaced with six new members including automated market maker [22], decentralized Oracle protocol [23], multi-chain platform Krystal[24], RiskDAO[25], [26], and Multichain[27]. The new multisig list contains seven members from the original set, including DeFi lender , Layer 2 exchange , , and BitGo. [21]

The migration became necessary since many of its initial signers have either become inactive or lost access to their keys. This resulted in the reduction in the availability of Multisig whose sole responsibility is to responsibly govern contracts. After completion of the migration, WBTC DAO will now require the vote of 8 out of its 13 signers to form a consensus and process a transaction. Before this change, the previous multisig which was created about 4 years ago needed 11 out of its 18 signers to reach a consensus on any issue. [21][29]

On 13th December 2022, WBTC completed 11 signatures necessary to start transitioning to the new DAO. It announced:

"The WBTC DAO completed a milestone – we've collected 11 signatures from current members to start transitioning to the new DAO. Thanks to all involved." [28]

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Wrapped Bitcoin (WBTC)

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May 13, 2024

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