Wrapped Bitcoin (WBTC) has rapidly reached $1Million in market liquidity on Compound Finance, less than one month after its addition to the DeFi lending platform.

The milestone demonstrates clear demand for Bitcoin exposure and liquidity, via the Ethereum platform – something that will likely continue to grow throughout the rest of 2019.

What is WBTC?

If you haven’t heard of WBTC before, you can think of it as the Bitcoin-equivalent of USDC.

WBTC is an ERC20 token, backed 1:1 by Bitcoin, which gives it full compatibility with the Ethereum platform and smart contracts.

Although tokenizing Bitcoin may seem strange at first thought, the true value of WBTC lies in its ability to operate within DeFi platforms. This includes everything from lending platforms such as Compound Finance, to decentralized exchanges.

Since the vast majority of established DeFi platforms run on the Ethereum network, WBTC provides users with exposure to Bitcoin without having to leave behind the useful dApps that Ethereum offers.

What benefits will WBTC have for crypto users?

  1. Decentralized Exchange (DEX) Compatibility: In crypto, the majority of trading pairs with significant trading volume are Bitcoin pairings – people are very accustomed to pricing assets in terms of BTC. WBTC enables trading and pricing on DEXes in Bitcoin prices, in a similar way to how USDC and DAI make things easier by pricing things in terms of dollars.
  2. Temporarily storing value: WBTC provides a simple way to hold your value in Bitcoin, without entering or exiting the ecosystem (once again, similar to how USDC and DAI make it easy to hold value in terms of US dollars).
  3. Lending markets: Bitcoin holders will now be able to gain interest on otherwise-idle BTC holdings, by lending it out in the form of WBTC on DeFi lending platforms.

Objections to centralization

There is one common objection to the concept, however.

This primarily surrounds the centralized nature of the coin and the fact that you do not hold the private keys to your Bitcoin while they are “wrapped”.

2 WBTC still relies upon a centralized intermediary, to lock up BTC collateral

At the very least, however, you can rest assured that you can verify whether or not the custodians maintain their 1:1 reserves. This is made possible via on-chain auditing, which can be viewed at any time on the wbtc.network website.

This is just the beginning

Overall, WBTC presents big potential for making your Bitcoin much more versatile within the cryptocurrency ecosystem.

With the surge in use via Compound Finance, as well support from renowned projects such as Kyber and Airswap, you can bet that we’ll be seeing much more of WBTC around in the future.