A Deep Dive on Wrapped Bitcoin

Wrapped Bitcoin (WBTC) acts as a bridge connecting Bitcoin to Ethereum. By connecting these two blockchains together, WBTC allows the world’s largest cryptocurrency to be used in the world’s largest decentralized finance (DeFi) ecosystem. WBTC is an ERC-20 token backed 1:1 by Bitcoin, allowing BTC holders to use their assets on Ethereum-based platforms. It brings Bitcoin’s value and security to Ethereum’s smart contract ecosystem for lending, trading, and more.

Overview and Purpose

WBTC addresses a fundamental challenge in the cryptocurrency ecosystem — Bitcoin's incompatibility with smart contract platforms. Bitcoin's unique Script programming language makes it incompatible with DeFi services on networks like Ethereum and Solana, which use different programming languages. WBTC solves this by creating a synthetic token version of Bitcoin that works seamlessly with smart contract-based services, while still being backed by actual BTC held in reserves.

Network Architecture

WBTC operates primarily on the Ethereum blockchain as an ERC-20 token, enabling it to interact with Ethereum's decentralized application ecosystem. The system relies on a network of partners including merchants and custodians, with BitGo serving as the central custodian responsible for securing the underlying Bitcoin assets. The conversion process between BTC and WBTC maintains a strict 1:1 ratio, ensuring each WBTC token is fully backed by Bitcoin.

WBTC Token Fundamentals

The WBTC token functions as a synthetic crypto asset that enables holders to participate in DeFi protocols. Users can deploy their WBTC to earn yield or use it as collateral for crypto loans, expanding the utility of their Bitcoin holdings. The conversion between BTC and WBTC can be accomplished either through direct interaction with WBTC Merchants (requiring KYC verification) or through supported exchanges.

Supply Characteristics

WBTC maintains a maximum supply cap of 21,000,000 tokens, mirroring Bitcoin's total supply limit. New WBTC tokens are issued only when BTC is deposited in BitGo's custodial account, maintaining a strict 1:1 backing ratio. This means the supply of WBTC is directly tied to the amount of Bitcoin held in custody.

Project Development

WBTC was launched on January 30, 2019, through a collaborative effort of three prominent DeFi projects: BitGo, Kyber Network, and Ren. The founding team includes notable blockchain industry figures:

• Mike Belshe, BitGo's co-founder and CEO, who brought extensive security expertise from his work at Google
• Taiyang Zhang and Loong Wang, co-founders of Ren, who contributed their expertise in blockchain interoperability
• Loi Luu, CEO and co-founder of Kyber Network, who provided critical knowledge in decentralized exchange protocols

The project is supported by a network of partners, including merchants, custodians, exchanges, and DAO members, each of which play an important role in maintaining and growing the WBTC ecosystem.

Relevant Links

• Official Website: https://wbtc.network/
• Smart Contract: https://etherscan.io/token/0x2260fac5e5542a773aa44fbcfedf7c193bc2c599
• X / Twitter: https://twitter.com/WrappedBTC
• GitHub: https://github.com/WrappedBTC/bitcoin-token-smart-contracts
• Whitepaper: https://wbtc.network/assets/wrapped-tokens-whitepaper.pdf
• Block Explorer: https://etherscan.io/