Wrapped Bitcoin (WBTC)

Trading

Wrapped Bitcoin lets Bitcoin be used on Ethereum-based decentralized exchanges (DEXs) like Uniswap and Sushiswap. This allows BTC holders to trade quickly and access more trading pairs.

Decentralized Finance (DeFi)

It enables Bitcoin holders to participate in DeFi activities such as lending, borrowing, and yield farming on Ethereum platforms like MakerDAO, Compound, and Aave. Users can deposit Wrapped Bitcoin as collateral or provide liquidity to earn interest.

Smart Contracts and dApps

Wrapped Bitcoin allows BTC to be used in Ethereum smart contracts and decentralized applications (dApps), expanding Bitcoin’s utility beyond just being a store of value.

Liquidity

By tokenizing Bitcoin on Ethereum, Wrapped Bitcoin increases liquidity in the DeFi ecosystem, making it easier to move and use Bitcoin within Ethereum’s network.

Pros of Wrapped Bitcoin

• Increased Liquidity: Brings Bitcoin’s liquidity to the Ethereum ecosystem, allowing Bitcoin to be used in many Ethereum-based apps and decentralized finance (DeFi) platforms.
• Cross-Chain Compatibility: Enables Bitcoin to be used on Ethereum, which supports smart contracts and a wider range of applications.
• Faster Transactions: Transactions on Ethereum with Wrapped Bitcoin are generally faster than on the Bitcoin network.
• Usability: As an ERC-20 token, Wrapped Bitcoin works with many wallets and decentralized exchanges on Ethereum.
• Transparency: The amount of Wrapped Bitcoin and its transactions are visible on the Ethereum blockchain.
• Access to DeFi: Allows Bitcoin holders to lend, borrow, and trade on Ethereum’s DeFi platforms without selling their Bitcoin.

Cons of Wrapped Bitcoin

• Centralization: Wrapped Bitcoin relies on trusted custodians (like BitGo) to hold the actual Bitcoin, which introduces some central points of control.
• Complexity: The wrapping and unwrapping process involves multiple steps and parties, which can be confusing for some users.
• Limited Availability: Wrapped Bitcoin is mainly available on Ethereum and a few other blockchains, not everywhere Bitcoin is accepted.
• Custodian Risk: Users must trust custodians to securely hold the Bitcoin backing the Wrapped Bitcoin tokens.
• Regulatory Uncertainty: As a newer innovation, Wrapped Bitcoin could face changing regulations that might affect its use.

These points highlight how Wrapped Bitcoin expands Bitcoin’s use but also introduces new factors to consider.

Founders of Wrapped Bitcoin

Wrapped Bitcoin was created by a group effort involving three main organizations: BitGo, Kyber Network, and Ren (formerly known as Republic Protocol). BitGo is a company that provides digital asset custody and security, Kyber Network is a decentralized liquidity protocol for token swaps, and Ren is a blockchain protocol that enables cross-chain asset transfers. These three worked together to launch Wrapped Bitcoin in January 2019.

Investors in Wrapped Bitcoin

• Consortium Founders: Wrapped Bitcoin was created by a group including BitGo, Kyber Network, and Ren in early 2019. These organizations initially invested in developing the Wrapped Bitcoin protocol.
• Custodian: BitGo acts as the centralized custodian holding the actual Bitcoin that backs each Wrapped Bitcoin token.
• Crypto Exchanges and DeFi Platforms: Various exchanges and decentralized finance (DeFi) platforms support Wrapped Bitcoin, enabling investors to use it within Ethereum-based ecosystems.
• Individual and Institutional Investors: Many Bitcoin holders and crypto investors use Wrapped Bitcoin to access Ethereum DeFi applications, effectively making them indirect investors in Wrapped Bitcoin.
• New Entrants: Other companies like 21Shares and Coinbase have launched their own wrapped Bitcoin products, attracting additional investors.

These groups together support the Wrapped Bitcoin ecosystem by providing liquidity, custody, and development resources.

Halal Status

Yes, Wrapped Bitcoin is generally considered halal because it is fully backed by actual Bitcoin reserves and operates transparently on the blockchain.

Reasoning

Wrapped Bitcoin represents Bitcoin at a 1:1 ratio and is used mainly to bring Bitcoin liquidity to Ethereum’s decentralized finance ecosystem. Since it is backed by real Bitcoin and does not inherently involve interest (riba) or gambling, many scholars view it as permissible under Islamic law.

Notes

• The halal status depends on how Wrapped Bitcoin is used, especially avoiding interest-based DeFi protocols.
• Transparency and verifiable backing by Bitcoin reserves support its halal classification.