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WBTC Dominance
WBTC is an Ethereum-based token tradable 1:1 for BTC, allowing users to put their assets to work in the decentralized finance (DeFi) world which is largely unavailable in the Bitcoin ecosystem.
The token is comfortably the market leader in the tokenized BTC sector, accounting for a 60.4% share, according to the Bitcoin Builders Association (BBA). When added together with distant runner-up BTCB (built on BNB), the two tokens have a market share of 87.2%.
However, this consolidation could be in the process of being broken up given the uptick in new tokens emerging of late. Of the 21 different participants in this sector, 40% have launched in 2024 or will do so in the near future, the BBA said.
Concerns over Centralized Custody
Earlier this year, some users of wrapped bitcoin (wBTC) were dismayed to find its issuer BitGo was sharing custody of their bitcoin (BTC) with BiT Global, a Hong Kong-based crypto custodian partly owned by TRON founder Justin Sun.
The episode “reopened old wounds inflicted by previous centralized custody failure,” even though it did not expose any novel flaws, the BBA said in a report on Wednesday.
“These wounds cause BTC holders to be unwilling to trade off their self-custody for trusted solutions,” the report said.
The BBA noted that there’s been signs of growing distrust toward centralized entities. WBTC’s supply has dwindled to 0.74% of the total bitcoin circulating supply from 1.5% over two years ago.
The collapse of numerous crypto entities in 2022 highlighted the risks of ceding custody of one’s coins to centralized custodians, a lesson that many users are not willing to learn the hard way again.
Stress Testing and Decentralization
wBTC is the most liquid token, is integrated across all the largest blockchains and has been stress-tested for over five years. However, the venture with BiT Global is a concern for many given the counterparty risk it introduces, “especially considering the involvement of Justin Sun, known for controversial practices in the crypto space,” according to the report.
On the other hand, a token like Bitcoin layer-2 Stacks’ sBTC has yet to be stress-tested (having gone live only this week) and its novel programming language Clarity can make DeFi integration more tricky. On the plus side, it is more decentralized than wBTC and inherits the protection of the Bitcoin network’s security.
Conclusion
The tokenized BTC market represents a mere 1.23% of the total bitcoin market cap, equal to around $25 billion at the time of writing.
This highlights the immense untapped potential for solutions offering a programmable version of BTC, the BBA said.
FAQs
Q: What is WBTC?
A: WBTC is an Ethereum-based token tradable 1:1 for BTC, allowing users to put their assets to work in the decentralized finance (DeFi) world which is largely unavailable in the Bitcoin ecosystem.
Q: What is the market share of WBTC in the tokenized BTC sector?
A: WBTC is comfortably the market leader in the tokenized BTC sector, accounting for a 60.4% share, according to the Bitcoin Builders Association (BBA). When added together with distant runner-up BTCB (built on BNB), the two tokens have a market share of 87.2%.
Q: What are the concerns over centralized custody?
A: The episode of wBTC’s issuance sharing custody of BTC with BiT Global, a Hong Kong-based crypto custodian partly owned by TRON founder Justin Sun, has raised concerns over centralized custody and the risks of ceding custody of one’s coins to centralized custodians.
Q: What are the alternatives to wBTC?
A: Other tokens like Bitcoin layer-2 Stacks’ sBTC, which has a more decentralized architecture and inherits the protection of the Bitcoin network’s security, may offer a more attractive alternative to wBTC for some users.
