Most blockchains were designed to operate in isolation, which has hindered interoperability in the DeFi market. Wrapped tokens emerged as a solution, allowing native assets from one chain to be used in the DeFi protocols on other chains.

WBTC is the biggest wrapped token by market capitalization, allowing Bitcoin holders to deploy the digital currency in Ethereum’s thriving DeFi ecosystem.

However, WBTC also has downsides, with centralization being a key concern. This has led to the launch of WBTC alternatives that address the wrapped token’s limitations.

Read on to learn about the leading WBTC alternatives and how they compare to WBTC.

What Is Wrapped Bitcoin (WBTC)?

Wrapped Bitcoin (WBTC) is a token backed 1:1 by Bitcoin.

WBTC was launched to allow decentralized apps (dApps) on Ethereum to access Bitcoin. Thanks to this integration, developers can easily write smart contracts incorporating Bitcoin transfers.

The token adds bitcoin liquidity to the Ethereum ecosystem, allowing BTC holders to interact with the DeFi on Ethereum while benefiting from many of Bitcoin’s core features.

To convert your BTC to WBTC, you must first send it to a merchant, who will forward it to a custodian and initiate the minting process. The custodian then mints the WBTC and sends the equivalent amount to the merchant, who eventually transfers the token to your wallet.

WBTC started on Ethereum but now is an option on several other blockchains, such as Tron, and Ethereum L2s, such as Base, bringing bitcoin liquidity to DeFi ecosystems across the cryptoverse.

WBTC Alternatives You Should Know

WBTC helped bridge the world’s largest blockchains, Bitcoin and Ethereum, and turned bitcoin into a popular asset in the DeFi market.

The wrapped token also paved the way for other tokens backed 1:1 by BTC, all of which are bringing BTC into other ecosystems to expand the use cases for the digital currency.

Here’s a list of WBTC alternatives worth checking out.

tBTC

tBTC or Threshold Bitcoin is a permissionless BTC-representing token created in 2020 and operated by the Threshold Network as a wrapped form of BTC on Ethereum.

Unlike WBTC, which relies on merchants and the custodian, tBTC says it uses a randomly selected group of node operators on the Threshold Network to secure deposited BTC. This wrapped version of BTC requires a threshold majority agreement before operators perform any action with your BTC. This should protect tBTC users against illicit actors colluding to steal your deposits.

tBTC can be minted in a few steps, starting from generating a deposit address, then depositing BTC, and finally initiating minting.

When you want to redeem your BTC, you need to set the redeemer address, specify the required amount, and request redemption. This will burn the tBTC tokens and register the redemption request in the bridge before the BTC arrives in your wallet.

Read more: Lending Protocol Aave to Propose Onboarding TBTC in Response to Concerns About Latest WBTC Custodial Changes

Per the official documentation, tBTC is not a price peg to BTC, but it’s a supply peg, which means that tBTC might trade at a slight premium or a discount.

The token currently has a total value locked (TVL) of $222 million.

dlcBTC

dlcBTC uses discrete log contracts (DLC) to offer an innovative solution for a self-wrapped form of Bitcoin on the Ethereum ecosystem to facilitate interoperable decentralized finance for BTC holders.

dlcBTC was launched in 2024 by DLC.Link, allowing BTC holders to lock their bitcoin into a DLC to mint this new type of wrapped BTC. DLCs were initially proposed by the Lightning Network developer Tadge Dryja as a way to enable smart contracts to send BTC.

To start the minting process you need to lock your bitcoin into a DLC. Also, you hold one key to multisig UTXO (unspent transaction output), while the second is distributed among the Attestor nodes.

The protocol should ensure only the depositor can access the locked BTC by harnessing the power of DLCs, preventing fraud attempts on the underlying bitcoin as well as eliminating third-party custody risks.

At the same time, it also relies on Bitcoin’s hashrate for high-level security, as well as segregated self-custody to ensure individualized security and control of each BTC locked in a DLC.

The first version of dlcBTC supports dlcBTC-BTC trading pairs on centralized exchanges to ensure direct conversion back to BTC. After the wrapped token is burned, the Attestors are responsible for releasing your locked BTC.

According to data from DefiLlama, dlcBTC has a total locked value (TVL) of $2.49 million.

21BTC

21BTC was launched early this year on the Solana blockchain by asset manager 21Shares, and has recently launched on Ethereum as well. The token is pegged to BTC on a 1:1 ratio and aims at unlocking bitcoin liquidity for DeFi users on Solana and Ethereum.

21Shares is known for its suite of wrapped tokens, and its version of wrapped BTC is part of a broader strategy to bring bitcoin into other blockchain ecosystems.

Read more: 21Shares Enters the Wrapped Bitcoin Market on Ethereum

Instead of relying on the standard lock and mint approach, 21BTC utilizes an institutional-grade third-party custodial solution to hold the underlying assets in cold storage. This storage is said to be holding sufficient assets to fully collateralize the wrapped token.

Both the minting and redeeming are handled by 21shares’ operating system Onyx.

The minting process involves sending a minting request to Onyx, while BTC is sent to the custodian. After they both validate the BTC funds, Onyx sends the wrapped version to your wallet.

Meanwhile, the redemption process is also straightforward as after requesting the 21BTC burn and choosing the required amount, Onyx sends repayment instructions to the custodian, which then returns BTC to your wallet.

21BTC is currently unavailable in some jurisdictions, including the US. At the time of writing, the project has a TVL of $6.2 million.

cbBTC

Coinbase just announced the launch of its own version of wrapped bitcoin, called cbBTC. cbBTC is specifically designed to operate on Coinbase’s Ethereum Layer 2 network, Base.

The announcement comes as WBTC is under scrutiny after BitGo announced its partnership with Tron’s Justin Sun in an attempt to move its WBTC business to multi-jurisdictional and multi-institutional custody.

It is estimated that cbBTC may be able to leverage the exchange’s brand to carve out its position in the competitive market, with analysts drawing examples from the success of the Coinbase-backed USDC stablecoin and the Coinbase Wrapped Staked ETH (cbETH) token.

cbBTC aims to maintain a 1:1 backing to mirror the underlying asset’s performance. cbBTC will maintain its 1:1 peg to BTC by relying on bitcoin reserves held in custody by Coinbase.

Unlike the majority of other wrapped BTC, cbBTC makes it easier to mint and redeem your tokens using automatic minting and conversion, which is directly integrated with the exchange.

When you send your BTC from Coinbase to an address on Base or Ethereum, the cryptocurrency will automatically be converted 1:1 to cbBTC. Meanwhile, when users receive cbBTC in their Coinbase accounts, it will be converted 1:1 from cbBTC to BTC.

Within a week of launching, cbBTC amassed a TVL of $123 million.

Upcoming Wrapped Bitcoin Alternatives

Innovation in the wrapped tokens space continues to thrive, with new entrants coming into the wrapped bitcoin market. One of the most exciting ones is arguably sBTC on Stacks.

sBTC

sBTC is a 1:1 BTC-backed asset on Stacks that will bridge the Bitcoin blockchain and other networks. The developers claim that the token will enable anyone to participate in the sBTC protocol and eliminate the need for a centralized entity to reserve custodial BTC.

The developers explain that, initially, the sBTC wallet will be maintained and managed by a limited sBTC signer set that will persist throughout the bootstrapping phase.

Also, BTC should be converted into sBTC within three Bitcoin blocks; and sBTC can be converted into BTC within six blocks, or approximately 60 minutes.

sBTC is already on testnet and, and in September 2024, the team announced the integration of this token with the Aptos Network.

The Wrap Up

Wrapped BTC tokens present an innovative way of allowing investors to deploy BTC on multiple blockchains to benefit from the ecosystems these chains have to offer.

The growth of this market segment signals the dominance and demand for BTC as an asset in the DeFi market.

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