WBTC is a DeFi-compatible version of BTC backed by BTC reserves held by a licensed custodian (BitGo).
WBTC is a mid-cap, fully collateralized asset. This asset depends on a centralized entity for custody services. This asset is exposed to the underlying risks of Polygon PoS bridge, a protocol rated as Moderately Risky. WBTC is a DeFi-compatible version of Bitcoin. It is backed 1:1 by BTC custodied by BitGo. WBTC on Polygon is backed 1:1 by WBTC locked on the Ethereum chain in the Polygon PoS bridge protocol. The asset has a fixed supply.
WBTC is highly correlated to the overall market.
Polygon PoS Bridge
WBTC launched on the Ethereum mainnet in January 2019 as a collaboration between major DeFi players, such as BitGo, Ren,and Kyber. The project is now controlled by a decentralized autonomous organization (DAO) called the WBTC DAO.
WBTC is maintained by a decentralized autonomous organization (DAO) that consists of 16 stakeholders within DeFi. The token is minted by a centralized custodian, BitGo. This process is initiated by merchants who send the user’s BTC to BitGo in return for WBTC tokens. Customers are required to undergo KYC checks to verify their identity before wrapping their BTC. Unwrapping the WBTC back to BTC involves the same process with the merchant requesting to burn WBTC and BitGo returning the equivalent amount of BTC. The amount to be redeemed is deducted from the merchant’s WBTC balance (on-chain), thus reducing the circulating supply.
WBTC will never have the same level of decentralization or security as BTC since it relies on trusting people and organizations to manage the system instead of automated smart contracts. Nonetheless, WBTC regularly undergoes audits and publishes all on-chain transactions and verifications for the Bitcoin and Ethereum networks. Users can always independently verify if the amount of BTC sent to the WBTC address on the Bitcoin blockchain matches the creation of WBTC tokens on the Ethereum blockchain, and vice versa.