Wrapped Bitcoin (WBTC) solves a core interoperability problem: Bitcoin and Ethereum are separate blockchains that cannot communicate natively. WBTC is an ERC-20 token that represents Bitcoin locked in a custodian’s wallet — 1 WBTC is always backed by 1 BTC. This allows BTC holders to participate in Ethereum DeFi protocols (Aave, Curve, MakerDAO) without selling their Bitcoin. Launched in January 2019, WBTC grew to represent over $10 billion in locked BTC at its peak — making it one of the largest custodial bridges in crypto. It is also the center of one of crypto’s most contentious governance disputes: the 2024 custody controversy involving Justin Sun.
How WBTC Works
Minting process:
- A user sends BTC to a registered WBTC merchant
- The merchant verifies KYC/AML, then submits a minting request to BitGo (custodian)
- BitGo locks the BTC in its custody and mints equivalent WBTC on Ethereum
- The user receives WBTC via the merchant
Burning process (redeeming BTC):
- User sends WBTC to merchant
- Merchant submits burn request to BitGo
- BitGo destroys the WBTC and releases the underlying BTC to the user
Proof of reserves: All WBTC-backing BTC addresses are publicly listed on-chain, allowing anyone to verify 1:1 backing in real time.
Governance: The WBTC DAO
WBTC is governed by a multisig DAO with members including BitGo, Ren Protocol, Kyber Network, MakerDAO, and others. Key controls — including custody transitions — require a supermajority of multisig signers to approve.
The 2024 Justin Sun Controversy
In August 2024, BitGo (WBTC’s sole custodian since 2019) announced it would transition custody of WBTC’s BTC holdings to a new joint venture with BiT Global — a company with ties to Justin Sun (founder of Tron).
Why this alarmed the DeFi community:
- Justin Sun is associated with multiple high-profile controversies including SEC securities fraud charges (filed 2023) and alleged TerraUSD manipulation
- Moving BTC reserves to a Sun-affiliated entity raised counterparty and jurisdictional risks
- Critically, the new custody structure would move keys to jurisdictions (Hong Kong, Singapore) where US law enforcement has limited reach
Market reaction:
- MakerDAO voted to begin winding down WBTC as a DAI collateral type, capping new WBTC-backed DAI issuance at zero
- Aave community passed a risk parameter update reducing WBTC’s loan-to-value ratios
- Coinbase accelerated development of cbBTC (its own wrapped Bitcoin product) as an alternative
- WBTC’s market cap began declining from its $10B+ peak
BitGo proceeded with the custody transfer in late 2024. BitGo’s founder Mike Belshe publicly disputed the Sun characterization, arguing Sun had no control over the keys. The controversy remained unresolved in dispute narratives as of early 2025.
Alternatives to WBTC
| Product | Custodian | Chain | Approach |
|---|---|---|---|
| WBTC | BitGo / BiT Global | Ethereum | Centralized custody |
| cbBTC | Coinbase | Ethereum, Base | Centralized custody |
| tBTC | Threshold Network | Ethereum | Decentralized, ECDSA threshold signatures |
| renBTC | (deprecated) | Ethereum | Decentralized (sunset 2022) |
Related Terms
Sources
- WBTC Whitepaper v1.0 (2019). WBTC Network.
- MakerDAO Governance Forum (2024). “WBTC Risk Assessment — Justin Sun Custody Transition.”
- Messari Research (2024). “Wrapped Bitcoin and the Custody Wars.”
- SEC v. Justin Sun et al. (2023). Securities and Exchange Commission Complaint.
- Glassnode (2024). “WBTC Supply on Chain Analysis.”