Wrapped BTC is a synthetic version of Bitcoin (BTC), represented by a token, built and deployed through a smart contract, in different blockchain networks. Usually backed on a 1:1 basis by BTC deposited as collateral by an entity that wants the synthetic version to be used in Decentralized Finances (DeFi).
Interestingly, it will now be possible to use Bitcoin-backed tokens on the Cardano (ADA) network, as announced by AnetaBTC’s official account on X. The mainnet went live on August 8, and the project will also have a synthetic BTC version for the Ergo (ERG) blockchain, which has yet to be made live.
Cardano has been growing its presence in DeFi, since the launch of its first native DeFi protocols in early 2022.
The system is still in experimental phases, and users must be aware of the inherent risks and security assumptions before deciding to use the tool. Currently, the AnetaBTC protocol works in its ‘v1’, which involves full custody and governance by the protocol creators.
“V1 is under our governance and is not decentralized. For v1, there is a public bitcoin address under our governance. Users send it using the wallet address when minting and our backend programmatically sends it out during redemption.”
— AnetaBTC Documentation
Roadmap and promises towards decentralization
AnetaBTC intends to further move to ‘v2’, which will use trusted third parties known as “guardians”. Guardians are “well-known projects in the ecosystem and a multi-signature schematic. This approach is uncollateralized, and the guardians have custody of the anetaBTC vaults”, as described in the roadmap.
The ‘v3’ is the final phase, as explained below:
“V3 will be most decentralized where anyone can run a vault by providing collateral. V3’s solution is inspired by the Xclaim whitepaper, where vault operators have a vested interest in maintaining the security of the protocol. Vault operators have the ability to act maliciously, but would lose their collateral, which is less than the amount of BTC they have in their custody. In this case, effected users receive more tokens than the amount of BTC they minted on the protocol.”
Wrapped Bitcoin on Ethereum
The concept of having ‘Wrapped Bitcoin’ first surged with an ERC-20 token built on Ethereum (ETH), called Wrapped BTC (wBTC), controlled by the custodian BitGo.
wBTC is also the biggest synthetic Bitcoin in the market, with a market cap of over $4.8 billion, with over 162,000 BTC minted for use in the Ethereum DeFi ecosystem. This amount accounts for around 0.83% of Bitcoin’s circulating supply.
AnetaBTC still only has 4.0781 BTC wrapped through their bridge, according to the minting platform. With a $120,303 market cap in Bitcoin’s current prices, by press time.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
