Last Updated: March 2026
Wrapped Bitcoin (WBTC) brings Bitcoin to the Ethereum ecosystem, letting BTC holders access DeFi without selling their Bitcoin. This guide explains how WBTC works, why it exists, and its risks.
What Is WBTC?
WBTC is an ERC-20 token on Ethereum that’s backed 1:1 by actual Bitcoin. Each WBTC is redeemable for one BTC held in custody. This “wrapping” process bridges Bitcoin’s value to Ethereum’s smart contract ecosystem, enabling BTC to be used in DeFi protocols.
Why Wrap Bitcoin?
Bitcoin’s blockchain doesn’t support smart contracts. If you want to lend your BTC on Aave, provide liquidity on Uniswap, or use BTC as DeFi collateral, you need a tokenized version on Ethereum. WBTC enables this. See DeFi guide and top DeFi projects.
How WBTC Works
- Minting: A user sends BTC to a custodian (BitGo for WBTC). The custodian locks the BTC and mints an equivalent amount of WBTC on Ethereum
- Using: WBTC can be used across any Ethereum DeFi protocol—lending, trading, collateral, yield farming. See yield farming guide
- Redeeming: To convert back, WBTC is burned and the custodian releases the equivalent BTC
WBTC Use Cases
- DeFi lending: Deposit WBTC as collateral on Aave or Compound to borrow stablecoins without selling BTC. See lending guide
- Liquidity provision: Add WBTC/ETH liquidity on DEXs to earn trading fees. See DEX guide
- Portfolio diversification: Access BTC exposure within Ethereum DeFi strategies
Risks
- Custodial risk: WBTC relies on BitGo to custody the underlying BTC. If BitGo is compromised, WBTC could depeg
- Smart contract risk: The WBTC contract on Ethereum could have vulnerabilities
- Centralization: A single custodian (BitGo) controls the backing. More decentralized alternatives (tBTC) exist but have less liquidity
- Depeg risk: WBTC typically trades at or very near 1 BTC, but could trade at a discount during extreme events
For security considerations: Security guide | Scam prevention
Alternatives to WBTC
- tBTC: More decentralized Bitcoin wrapper using threshold signatures
- cbBTC: Coinbase’s wrapped Bitcoin, backed by Coinbase custody
- sBTC: Bitcoin on Stacks (Bitcoin L2)
Frequently Asked Questions
Is WBTC safe?
WBTC relies on BitGo as custodian. Safe as long as BitGo holds the BTC. Custody risk exists.
Why not just use Bitcoin in DeFi?
Bitcoin’s blockchain doesn’t support smart contracts. WBTC wraps BTC for Ethereum DeFi use.
Can I unwrap WBTC back to BTC?
Yes — WBTC can be redeemed for BTC through authorized merchants.
