After BitGo announced the transition of its wrapped Bitcoin (WBTC) custody earlier this month, the market of wrapped BTC assets has again come into the spotlight. Although having a high adoption in the Ethereum DeFi ecosystem, WBTC is not the only such project. And just recently, crypto giants Coinbase and Mantle consequentially announced the launch of cbBTC and FBTC, respectively.
DWF Ventures’ team has researched on the wrapped BTC market and compared a list of available options:
Top LRT Protocols
How Does Wrapped Bitcoin Work?
A wrapped Bitcoin is a version of Bitcoin (BTC) that operates on other blockchains, such as Ethereum or BNB Chain, in the form of a fungible token. The main purpose of a wrapped Bitcoin is to make BTC accessible in dapps running on their respective networks.
WBTC is an ERC-20 version of BTC. It has gained wide adoption, because it allows Bitcoin holders to participate in the global DeFi ecosystem, which is primarily centered around Ethereum. WBTC enables the integration of Bitcoin into various protocols, including lending, borrowing, yield farming, and others.
Ultimately, WBTC bridges the gap between the two largest blockchain ecosystems, bringing Bitcoin’s value into the more flexible Ethereum space.
Types of Wrapped BTC Assets
There are two main types of wrapped BTC tokens:
- Custodial. These crypto assets rely on centralized entities to manage the underlying BTC reserves. A custodian, usually being a company, holds the actual bitcoin and issues the corresponding wrapped tokens. Users trust the custodian with maintaining a 1:1 peg between the wrapped asset and bitcoin in reserves. The primary benefit of custodial tokens is that they are generally easier to manage and have stronger liquidity, albeit carrying counterparty risks.
- Trust-minimized. Trust-minimized wrapped BTC tokens eliminate or reduce reliance on a single custodian by utilizing decentralized protocols, cryptographic security, or a network of signers. These assets are designed to offer a more decentralized and secure alternative to custodial models. But, while they reduce third-party risk, these cryptos may face technical complexities and lower liquidity compared to custodial solutions.
Custodial Wrapped BTC Projects
Wrapped Bitcoin (WBTC)
Site: https://wbtc.network/
WBTC is a custodial wrapped bitcoin token, managed by BitGo in partnership with BIT Global. Launched in 2019, WBTC boasts a market cap of $9.2 billion (as of August 21, 2024), making it the largest wrapped BTC asset. WBTC enables bitcoin to be used in DeFi apps across various chains, with a major stake in Ethereum. It maintains its liquidity through partnerships with numerous exchanges and DeFi protocols.
Bitcoin BEP2 (BTCB)
Issued by Binance, BTCB is a custodial wrapped BTC token designed for BNB Chain and its DeFi ecosystem. Binance directly holds the bitcoin reserves for BTCB. With a market cap of $3.9 billion, BTCB is widely used within Binance’s platforms for trading, staking, and lending purposes, such as PancakeSwap and Thena Fusion. BTCB’s liquidity and reliability stems from Binance's dominance in the crypto space.
Merlin BTC (mBTC)
Site: https://merlinbtc.com/
Managed by an L2 EVM Merlin Chain, which focuses on building the DeFi ecosystem of BTC-based assets and dapps, mBTC is its main bitcoin-pegged token, secured by custodians Cobo and Fireblocks. The asset’s market cap has reached $1.3 billion by the end of August 2024.
Coinbase BTC (cbBTC)
The wrapped bitcoin market would not be complete without the participation of the main US crypto exchange Coinbase, which sounded the plans to launch cbBTC on its Ethereum L2 called Base just a week ago. We anticipate the company will likely partner with BitGo in this endeavor, although no other details nor the launch date have been disclosed to the public yet.
Ignition (FBTC)
Site: https://fbtc.com/
FBTC is an “omnichain” custodial token offering exposure to bitcoin, launched in July 2024 by Mantle with Cobo serving as the custodian. It is distinctive from other wrapped BTC projects by offering a cross-chain asset, transferable using the proprietary bridge (hence “omnichain”). In just a month, FBTC managed to surpass the $100 million TVL mark, promising a wider adoption for this cryptocurrency. At the moment, you can trade it on Uniswap, Agni Finance or Merchant Moe platforms.
Trust-Minimized Wrapped BTC Tokens
tBTC
Site: https://tbtc.network/
tBTC is a wrapped bitcoin token backed by Threshold Network that leverages a decentralized network of signers instead of a single custodian. It is secured by a network of participants, including major names like Gemini. With a market cap of over $200 million and around $70 million of TVL, tBTC has emerged as a viable decentralized alternative to custodial solutions. Threshold Network works as a “decentralized custody” for the asset, with any user having the ability to mint tBTC using collateral, and redeem it back.
ALEX BTC (aBTC)
aBTC is a trust-minimized token running on the Stacks blockchain, locked in a multisignature crypto wallet controlled by the ALEX LAB Foundation. Its market cap was about $44.6 million in August 2024, providing holders of aBTC with a decentralized BTC derivative for use in DeFi apps.
sBTC (Stacks Bitcoin)
Site: https://sbtc.tech/
sBTC is a non-custodial wrapped BTC token, issued on the Stacks network. It is secured by an open network of signers and serves the growing Stacks ecosystem, which integrates bitcoin’s security features with smart contracts. In particular, all transactions within Stacks are finalized in the bitcoin network, bringing an additional security layer. The project currently has a market cap of $11.1 million.
dlcBTC
Site: https://www.dlcbtc.com/
dlcBTC is a wrapped BTC token, protected by the so-called discreet log contracts (DLCs), a cryptographic method that enhances security and privacy. Aimed at institutions rather than retail users, it allows a depositor to create “storages” for the locked bitcoins that can only be accessible by the owner. dlcBTC’s current market cap is $2.3 million.
cBTC1 (Ordibank Bitcoin)
cBTC1 is an upcoming token, pegged to bitcoin and managed by the cross-chain lending protocol called Ordibank. It utilizes the same DLC technology for cBTC1’s collateral. One notable Ordibank’s specifics is its support of the experimental BRC-20 token standard for bitcoin.
Overall
Although WBTC remains the largest and most widely adopted asset on the wrapped Bitcoin market, new entrants like Coinbase's cbBTC and Mantle's FBTC highlight increasing competition. These tokens increase opportunities for Bitcoin holders to participate in a wider DeFi ecosystem. As the DeFi market matures, more solutions, from centralized custodians to decentralized protocols, will appear to provide flexibility in accessing Bitcoin-based assets across different networks.
If you are looking for a crypto VC partner, feel free to contact DWF Ventures.
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