In our previous piece, we explored how BTC is moved from the Bitcoin blockchain to Ethereum – and other networks – via a process called "wrapping". This follow-up examines a centralized wrapping example, detailing the on-chain transaction process.
How Wrapped Bitcoin (WBTC) Works
Wrapped Bitcoin (WBTC) is an ERC20 token backed 1:1 by Bitcoin, enabling BTC usage on Ethereum-based platforms without selling BTC for ETH/ERC20 tokens. Launched in January 2019 by REN, Kyber, BitGo, and others, WBTC is now governed by the WBTC DAO, a 17-member consortium managing merchant/custodian approvals via multi-sig contracts.
👉 Discover how WBTC bridges Bitcoin and Ethereum
Key Metrics
- 270,000+ BTC held in custody
- 335,000+ BTC (worth $13.6B) wrapped historically
WBTC Minting and Burning Process
Minting WBTC: Step-by-Step
- Merchant Deposits BTC: Verified merchants send BTC to BitGo’s custodian address (e.g.,
3JJpCZCk4h4TpQeU7SA1yhH768Xgbtdbfg). Fee Deductions: Merchants levy fees (0.05–0.25%). Custodians take an additional 0.04–0.05%.
- Example: 2,500 BTC deposited → 2,499 WBTC minted.
- On-Chain Confirmation: WBTC DAO validates the request, transferring WBTC to the custodian’s Ethereum account (e.g.,
0xcbd12525cdd4cd76455859ea3da141c412e54f96).
Burning WBTC: Step-by-Step
- Merchant Requests Burn: WBTC is sent to the DAO’s burner address.
- BTC Release: Custodian withdraws BTC from custody, sending it to the merchant’s BTC address (e.g.,
3LC89Wz88iUBnDtnuhBooxJXDWgbYK6paE). - On-Chain Update: Ethereum records the burn event, noting the WBTC amount and BTC transaction ID.
FAQs
How secure is WBTC?
WBTC uses multi-sig governance and audited custodianship by BitGo, ensuring 1:1 BTC backing.
What are the fees for wrapping BTC?
Total fees range from 0.09% to 0.3%, split between custodians and merchants.
Can WBTC be used on DeFi platforms?
Yes! WBTC integrates with Ethereum-based DeFi apps like Uniswap and Aave.
👉 Explore WBTC’s use cases in DeFi
Who governs WBTC?
The WBTC DAO, comprising 17 members like Kyber and BitGo, oversees merchant/custodian approvals.
Why WBTC Dominates the Market
WBTC leads with ~80% of wrapped Bitcoin volume due to:
- Institutional Trust: Backed by BitGo’s custodial services.
- Liquidity: Deep integration across Ethereum’s DeFi ecosystem.
Other wrappers (e.g., RENBTC) offer decentralized alternatives but lack comparable adoption.
For transparency, always verify WBTC’s circulating supply via official dashboards.
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