What is Wrapped Bitcoin (wBTC): Wrapped up in a neat package

Despite issues of centralisation, the popularity of Wrapped Bitcoin continues to grow


Wrapped Bitcoin (wBTC) is a tokenised bitcoin (BTC) asset established in January 2019 as a joint project between the digital asset custodian BitGo and the two liquidity merchants Kyber, and Ren. 

By far the most popular of all tokenised BTC products, Wrapped Bitcoin provides BTC holders with the ability to deploy their assets on the Ethereum blockchain’s vast array of decentralised applications (DApps).

Highly transparent yet also centralised, wBTC is consistently growing in popularity, having recently entered the Top 20 cryptocurrency charts. 

If you have been wondering what is Wrapped Bitcoin (wBTC) and how does Wrapped Bitcoin work, we have you covered. Join us below for a look into this rapidly growing cryptocurrency project.

What are wrapped tokens?

Wrapped tokens are a tool for providing interoperability across different blockchains, allowing holders of one cryptocurrency to tap into the utility available beyond that coin’s native blockchain. In the case of wBTC, holders of bitcoin can gain access to the multitude of decentralised finance (DeFi) and decentralised exchange (DEX) applications available on Ethereum.

Wrapped tokens share many similarities to stablecoins. Your equity does not increase when you receive a wBTC. Rather, your original BTC is held as collateral until you are ready to exchange back.

Tokenised BTC assets like wBTC are becoming an increasingly popular DeFi tool, as evidenced by the graph below.

Graph showing increasing popularity of wrapped bitcoin tokens – Photo: theblockcrypto.com
wBTC is far and away the most popular wrapped BTC asset, with hBTC a distant second – Photo: theblockcrypto.com

Tokenised BTC assets now account for 1.7% of total BTC supply. While that might not sound like a large figure, the total market capitalisation of all tokenised BTC currently amounts to more than $14bn (£10bn) and counting.

Why wrap your bitcoin?

So what is Wrapped Bitcoin coin used for? Despite bitcoin’s advantages as a store of value and investment asset, the world’s largest cryptocurrency has limited utility. Slow block times, high gas fees and limited DeFi options hamstring the coin, although in all fairness,  bitcoin was never intended to be more than a straightforward fiat alternative when it launched in 2009.

Conversely, the Ethereum (ETH) blockchain hosts an ever-expanding ecosystem of DeFi projects, DEXs and other DApps, benefitting from faster block times and comparatively cheap gas fees. Although there are more efficient blockchains out there (Solana, for example), Ethereum remains by far the most popular blockchain for the deployment of smart contracts.

Interoperability is becoming more important in the crypto world in order to take advantage of the multitude of DeFi platforms native to different blockchains. In fact, Ethereum users are increasingly wrapping their ETH tokens on other blockchains such as Polygon to take advantage of even faster transaction speeds. Wrapped tokens are one piece of the puzzle to solve this issue of interoperability.

How transparent is Wrapped Bitcoin?

Wrapped Bitcoin’s white paper outlines its trust model for the holding of BTC and minting of wBTC. A user’s BTC is held by the custodian BitGo, a qualified digital asset custodian under New York State banking law. BitGo announced the custodianship in January 2019.

Stats showing proof of assets and various custodian wallets – Photo: wbtc.network
Various custodian wallets hold BTC collateral – Photo: wbtc.network

Above you can see proof of assets matching custodianship of BTC held by BitGo wallets with wBTC tokens on the Ethereum smart contracts. Some wallets are displayed; the rest can be viewed through this link. This information is supplied by Wrapped Bitcoin itself, however, through analysing listed BitGo wallets on the Blockstream explorer, we are able to match balances as a confirmation. The balance of the top address is displayed below.

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Custodian wallet showing 2200 held Bitcoin – Photo: blockstream.info
This custodian address holds roughly 2200 BTC – Photo: blockstream.info

Thankfully, the custodian is unable to mint wBTC; that job is performed by the merchants Kyber and Ren (previously called Republic Protocol). Separating the roles of custodian and merchant ensures that minting can only occur when the asset is backed. A Kyber security audit is available here and numerous Ren audits are available here. On that note, Wrapped Bitcoin code audits are also available here.

The customer only interacts with the merchant, initiating swaps between BTC and wBTC. The merchant must then initiate a minting transaction with the custodian, who actually holds the assets. When the customer requests their BTC back, the burn transaction must be initiated in the same way. The deal flow means no single party has full control over distribution. Minting and burning transactions are all presented on chain. An example is presented below.

Transaction showing a minting of wrapped bitcoin – Photo: wbtc.info
Minting and burning is all presented on chain – Photo: wbtc.network

Given the transparency noted above, Wrapped Bitcoin could be considered a secure project, although there are always risks involved in trading cryptocurrency assets. Transaction fees are imposed every time wBTC and BTC is exchanged.

The issue of centralisation

Having established the core elements of the Wrapped Bitcoin cryptocurrency, you may be wondering how wBTC works to maintain an element of decentralisation. The concise answer is that it doesn't. BitGo is the sole third party holding all wBTC collateral.

This increases risk, although BitGo is perhaps the most trusted digital custodian in existence. The risks involved in centralisation have brought other tokenised Bitcoin services to the market. One such alternative, Keep (tBTC), uses “off-chain containers that allow contracts to manage and use private data without exposing the data itself to the public blockchain.”

An analysis of the market shows that users seem more than happy to take on centralisation risks for insurance (BitGo has a $100m insurance policy with Lloyd’s of London) and transparency. According to the open-source project BTC on Ethereum, Wrapped Bitcoin (wBTC) accounts for slightly over 80% of BTC deployment on the Ethereum chain. The competitor Huobi (hBTC) accounts for 12%. tBTC constitutes only 0.002%.

Who uses Wrapped Bitcoin?

The Wrapped Bitcoin cryptocurrency is predominantly used by large-scale traders and institutions. While any individual holder may initiate a swap, your BTC is held as collateral, similar to how a house is leveraged against a mortgage. Should you make an unwise investment with your wBTC, you could lose your collateral.

How well is wBTC performing?

As mentioned earlier, wBTC coin is far and away the most popular tokenised BTC asset. Having recently cracked the top 20, wBTC’s market capitalisation of $11.33bn makes it the 17th most popular cryptocurrency.

Naturally, wBTC’s price is pegged to BTC, which is currency trading around the $43k mark. A recent wBTC 24-hour trading volume of $417.04m amounted to 3.6% of market capitalisation.

Since wBTC coin is minted and burned based on user demand, there is no set maximum supply. Theoretically, no more than 21 million wBTC could ever be minted, given BTC’s maximum supply, although it is doubtful whether this would ever happen. The latest circulation figure was 263,530.

The future growth of Wrapped Bitcoin is contingent on the popularity of Ethereum-based DeFi applications. Given the fact that this shows little sign of slowing down, we could expect wBTC to stick around. 


There are currently 263,530 wBTC in circulation. Since wBTC is pegged to Bitcoin, there is no maximum supply save for Bitcoin’s 21 million maximum. It is doubtful whether this figure will ever be reached.

Wrapped Bitcoin was established in 2019 as a joint project between the digital asset custodian BitGo and the liquidity merchants Ren (formerly Republic Protocol) and Kyber.

Wrapped Bitcoin suffers from centralisation issues. BitGo is the sole third party responsible for custodianship of swapped bitcoin. That said, BitGo is a regulated entity with a $100m insurance policy from Lloyd’s of London and a strong market reputation.

Transactions are performed through Ethereum’s Proof-of-Work (PoW) mechanism, which will soon migrate to a Proof-of-Stake (PoS) system.

Further reading

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