Project Name: Wrapped Bitcoin
Tag: $WBTC
Type: ERC20

Introduction

Wrapped Bitcoin (WBTC) is the first ERC20 token fully backed 1:1 by Bitcoin. WBTC is jointly launched by blockchain projects such as BitGo, Kyber Network, and Ren.

WBTC Issuance Mechanism

The process of issuing WBTC involves several key roles, including users, custodians, merchants, and DAO members.

• Custodian: The institution or party that holds the assets. In the case of WBTC, this role is performed by BitGo. Custodians hold the keys required to mint tokens.
• Merchant: The institution or party responsible for receiving and burning wrapped tokens. Merchants play a key role in the distribution of wrapped tokens. For WBTC, Kyber and Republic Protocol initially serve this role. Each merchant holds a key to initiate the minting and burning of wrapped tokens.
• User: The holders of wrapped tokens. Users can transfer and trade wrapped tokens within the Ethereum ecosystem just like any other ERC20 token.
• WBTC DAO Member: Contract changes and the addition/removal of custodians and merchants are controlled by a multi-signature contract. The keys to the multi-sig contract are held by institutions that are part of the WBTC DAO. ![Image] After users submit Bitcoin to the merchant, the custodian stores an equivalent amount of Bitcoin in the custody address and generates the corresponding amount of WBTC, which is then sent to the user’s Ethereum wallet. The entire process is transparent and can be verified on the blockchain.
  

WBTC Minting and Burning

Minting refers to the process of creating new wrapped tokens. In the wrapped framework, minting must be done by the custodian, but it needs to be “initiated” by the merchant. It’s important to note that the minting process does not involve the user; it is a set of transactions between the merchant and the custodian.

Burning refers to the process of redeeming BTC with WBTC tokens. Only merchant addresses can burn wrapped tokens. To perform the burn operation, the “burn” function must be called in the smart contract, specifying the amount of tokens to be burned on the Ethereum chain. Through this process, the corresponding amount is deducted from the merchant’s WBTC balance (on-chain), reducing the supply of WBTC.

Trust Model

The wrapped asset framework relies heavily on the trustworthiness of custodians, as they hold assets that could potentially be stolen, or they may fail to maintain a one-to-one asset backing. The framework aims to minimize this reliance on trust through several measures:

• Quarterly Audits: External third parties will conduct quarterly audits to verify that all minted wrapped tokens are fully backed by an equivalent amount of assets held by the custodians. For WBTC, proof of reserves can be demonstrated by publishing signatures from the addresses where Bitcoin is stored.
• Minting Control: Custodians cannot independently mint tokens; they require initiation by a merchant. Therefore, the creation of new tokens involves both the custodian and the merchant.
• User Isolation: Users are insulated from direct interaction with the custodian through a set of merchant institutions. Users do not need to trust a single merchant; rather, they rely on the collective trust of all participating merchants.
• Institutional Credibility: The existing credibility of all institutions involved in the framework is at stake, impacting their reputation.

Key Metrics

Community & Background

Twitter Followers: 36,000+
The project officially launched in January 2019, with BitGo as the primary custodian. BitGo has been a leading digital asset company serving institutional clients since 2013, providing custody, liquidity, and security solutions for institutional investors. BitGo is active in both centralized and decentralized finance, offering market-leading trading, lending, and borrowing services through its prime brokerage service, and serves as the custodian for WBTC, the world’s leading Bitcoin stablecoin.