Glossary / Markets & investing
Wrapped bitcoin
Also known as WBTC.
- Definition
- Wrapped bitcoin is an Ethereum token that a custodian issues against real bitcoin it holds, so the price tracks BTC while the ownership is a claim on a company.
Every WBTC token is supposed to correspond to one bitcoin sitting with a custodian, and roughly 125,000 of them are outstanding. The token exists so bitcoin's price can be used inside Ethereum contracts, which bitcoin's own script cannot run. If all you want is to own bitcoin, wrapping adds a custodian, a contract, and a second chain between you and the coin.
How it works
Wrapping is a deposit and receipt system with extra steps, run by a small set of approved firms.
WBTC launched on January 31, 2019 with eight approved merchants, built by BitGo, Kyber Network and Republic Protocol (later Ren). The flow has not changed much since. A merchant sends bitcoin to the custodian, the custodian confirms receipt, and an equal number of tokens is minted on Ethereum. Burning tokens reverses it. Ordinary users almost never touch that pipeline: they buy the token on an exchange or a decentralised trading pool at whatever price the market gives, which can sit slightly above or below the bitcoin price when redemption is slow.
The reserves are published, and that publication is the whole trust model. Anyone can read the bitcoin addresses holding the backing and compare the balance with the token supply. What no one outside can audit is the legal and operational control over those addresses, which is why the August 2024 restructuring mattered so much: BitGo moved custody into a joint venture with BiT Global, a firm tied to Tron founder Justin Sun, spreading keys across several jurisdictions.
The reaction was fast. Sky, the lender formerly called MakerDAO, ratified a plan to remove WBTC as loan collateral in a vote that closed on September 19, 2024, and Coinbase halted WBTC trading on December 19, 2024, citing its listing standards. Coinbase had launched its own wrapper, cbBTC, on September 12, 2024, and BiT Global sued over the delisting.
Where you see it
Wrapped bitcoin shows up in three places, and only one of them is a good reason to hold it.
Lending and trading protocols are the real use. If you want to borrow stablecoins against bitcoin exposure, or provide liquidity in a bitcoin pair on an Ethereum exchange, a wrapper is the only way in, because bitcoin's script has no way to participate in those contracts.
Exchange listings are the accidental use. A beginner searching a multi-asset app for "bitcoin" can be shown WBTC beside BTC, at nearly the same price, and buy the wrong one. There is no way to move WBTC to a hardware wallet as bitcoin; it lives on Ethereum and needs an Ethereum wallet.
Competing wrappers are the third. cbBTC is issued by Coinbase, tBTC uses a distributed signer set rather than a single custodian, and each has its own failure mode. None of them removes the basic trade: you are holding a promise that someone will give you bitcoin later.
Wrapped bitcoin vs a spot ETF
Both are wrappers around bitcoin you do not hold, but they fail differently and are sold to different people. A spot ETF is a regulated fund: shares are created and redeemed by authorised participants, a named custodian holds the coins, and a securities regulator supervises the disclosure. It trades when the stock market is open and it cannot be plugged into anything. A wrapped token has no regulator and no prospectus, settles in minutes at any hour, and can be posted as collateral in a lending contract at three in the morning. The ETF's risk is institutional and slow; the token's risk is custodial and quick, and in 2024 it moved without a single holder being asked.