Wrapped Bitcoin (wBTC) is an ERC-20 token on the Ethereum network that represents Bitcoin with a 1:1 backing ratio. This structure allows BTC holders to use their assets within the Ethereum-based decentralized finance (DeFi) ecosystem engaging in lending, staking, and trading without having to sell or move their Bitcoin to another blockchain.
On November 19, 2024, Coinbase announced plans to discontinue trading support for Wrapped Bitcoin (wBTC) effective December 19, 2024. According to Coinbase, this decision followed a routine review of assets listed on its platform, concluding that wBTC no longer meets their listing standards.
The announcement was met with surprise across the crypto community, as wBTC is one of the most popular tokens in the DeFi sector, with a total value locked (TVL) exceeding $13.5 billion.
wBTC Team’s Reaction to the Delisting Announcement
Following Coinbase’s announcement to delist Wrapped Bitcoin (wBTC) from its platform, the wBTC team quickly expressed their disappointment in an official tweet. They described the decision as surprising and unexpected, especially given that wBTC has long been regarded as one of the most decentralized and transparent BTC tokenization products on the market.
The wBTC team reaffirmed their commitment to maintaining strong regulatory and decentralized standards in all aspects of wBTC management, aiming to provide a trustworthy product for the DeFi community.
In the tweet, they urged Coinbase to reconsider its decision and expressed their willingness to engage in further discussions to address any concerns related to compliance or transparency.an produk alternatif Coinbase, yaitu Coinbase Wrapped Bitcoin (cbBTC), yang tampaknya akan menggantikan wBT.
Justin Sun’s Involvement in wBTC
Coinbase has not specified why wBTC failed to meet its listing standards, but external factors are thought to have influenced the decision. One major concern is the governance of wBTC, which became complex after BitGo partnered with BiT Global, an entity linked to Justin Sun. This partnership gave Sun partial control over wBTC, raising compliance and transparency questions.
Sun’s involvement has caused unease in the crypto community due to his controversial governance practices. Many worry this influence could undermine wBTC’s decentralized principles, impacting its reputation in DeFi.
The shift in wBTC’s governance has also led DeFi platforms like MakerDAO and Aave to reconsider supporting it as collateral or a liquidity asset. As these platforms re-evaluate, the future of wBTC in DeFi remains uncertain.
Exploring wBTC and Its Impact on the DeFi Universe
Wrapped Bitcoin (wBTC) is a groundbreaking crypto token that represents Bitcoin (BTC) on the Ethereum network. Created in the ERC-20 format, wBTC allows Bitcoin holders to tap into Ethereum’s decentralized finance (DeFi) ecosystem—think lending, staking, and liquidity pools—without needing to sell or transfer their BTC to a different blockchain.
The Functions of wBTC for Traders | Source: wBTC
With wBTC, Bitcoin holders can now leverage their assets across DeFi, opening up new financial opportunities.
Each unit of wBTC is backed 1:1 by Bitcoin stored securely with a trusted custodian, meaning that the value of wBTC closely follows that of Bitcoin. This backing guarantees that users can exchange 1 wBTC for 1 BTC at any time, making wBTC an appealing choice for those looking to use their Bitcoin in Ethereum’s DeFi platforms.
Uses of wBTC:
- Allows Bitcoin to be used in DeFi applications on Ethereum, such as lending and staking.
- Acts as collateral in DeFi protocols, enabling users to borrow other cryptocurrencies or stablecoins.
- Provides a way to earn returns by supplying Bitcoin liquidity to DeFi pools, where users can collect transaction fees and rewards.
- Lets Bitcoin be traded within Ethereum-based protocols without requiring network switching.
Goals of wBTC:
- Brings Bitcoin liquidity to the Ethereum ecosystem, driving greater activity in the DeFi space.
- Bridges the Bitcoin and Ethereum ecosystems, expanding Bitcoin’s accessibility within Ethereum applications.
- Gives Bitcoin holders options to optimize their assets without having to sell or convert them to other assets.
- Boosts DeFi adoption by making Bitcoin usable within Ethereum-based protocols, attracting more users to DeFi.
While wBTC has many strong use cases and goals that contribute Bitcoin liquidity to Ethereum’s DeFi ecosystem, it now faces a new challenge from Coinbase’s recently launched token, Coinbase Wrapped Bitcoin (cbBTC). Designed as a more transparent, integrated option within Coinbase, cbBTC is stepping up to compete with wBTC for a share in the DeFi market.
Competition with Coinbase Wrapped Bitcoin (cbBTC)
Coinbase Wrapped Bitcoin (cbBTC) is an ERC-20 token launched by Coinbase in September 2024 as an alternative to Wrapped Bitcoin (wBTC). Like wBTC, cbBTC is backed 1:1 by Bitcoin reserves, but it is fully managed by Coinbase.
cbBTC allows users to access BTC liquidity within the Ethereum ecosystem, offering high transparency and regular audits conducted by Coinbase. This token is designed to provide users with a safer, more seamless way to transact and leverage their BTC in decentralized finance (DeFi) applications that integrate with the Coinbase platform.
Key differences between cbBTC and wBTC:
- Custodian: cbBTC is fully managed by Coinbase, whereas wBTC is managed by BitGo in collaboration with multiple partners, following a community governance model.
- Transparency: cbBTC undergoes regular audits directly by Coinbase, while wBTC follows a decentralized structure with more limited transparency.
- Accessibility: cbBTC is directly integrated with Coinbase, making it easily accessible to Coinbase users; meanwhile, wBTC has broader availability across various DeFi platforms.
- Governance Approach: wBTC takes a decentralized approach with community participation, though its partnership with BiT Global has raised governance concerns. cbBTC, on the other hand, is centrally managed under Coinbase’s full control.
With these different approaches, cbBTC and wBTC offer distinct wrapped Bitcoin options tailored to users’ preferences, whether they prioritize centralized security or a more open, community-governed ecosystem.
Related Coinbase to delist WBTC, halt trading on Dec. 19
Impact on the DeFi Ecosystem
Coinbase’s decision to delist Wrapped Bitcoin (wBTC) has sent waves through the decentralized finance (DeFi) ecosystem. For years, wBTC has been a go-to asset, bringing Bitcoin liquidity seamlessly into the Ethereum world. With over $13.6 billion in total value locked (TVL), wBTC plays a crucial role in several major DeFi platforms, including:
- MakerDAO – where wBTC serves as collateral for minting the stablecoin DAI, providing stability and assurance to users.
- Aave – offering users access to lending markets, enabling Bitcoin borrowing and lending in DeFi.
- Uniswap – where wBTC in liquidity pools allows users to earn yield by participating in decentralized exchanges.
However, with the introduction of Coinbase Wrapped Bitcoin (cbBTC), there has been a major market shift. In just weeks after its launch, cbBTC quickly gained traction on Aave, with its market share in synthetic Bitcoin rising from 3% to 17%. Incentive programs like Aave’s October Merit reward program accelerated this transition by rewarding users for depositing cbBTC and borrowing USD Coin (USDC).
Coinbase’s move not only creates an integrated, secured alternative but also introduces a new “star” to the wrapped Bitcoin market. Now, users face a choice between the stability and security of Coinbase-audited cbBTC or the freedom and decentralization of wBTC. This shift has the potential to reshape the DeFi landscape, positioning cbBTC as a leading choice for users who prioritize certainty and security within Coinbase’s ecosystem.
You can also read this : Polymarket Whale Loses “zxgngl” $3.6 Million on Mike Tyson Bet
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
