Wrapped Bitcoin and its affect on supply

RapTarX

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Quote from: JeromeTash on February 06, 2021, 03:14:45 PM

WBTC works like this. I have 1 BTC and if I need 1 WBTC, the issuer of WBTC takes the real 1 BTC from me and then mints 1 WBTC and issues it to me. When i no longer need the 1 WBTC, I can swap it from my real 1 BTC and the WBTC I had gets burned by the issuer's smart contract. So WBTC has no impact on Bitcoin's circulating supply except tools like coinmarketcap might misinterpert the data.

The WBTC you actually see on coinmarketcap is equivalent to locked Real Bitcoin

@renegadetrader has an excellent point.

Ok, I got your point. If that's the fact behind WBTC, then how come they have their own marketcap? It’s a total mess when you calculate it. You are not excluding the BTC from the circulation and you are also counting the WBTC. Total mess.

JeromeTash

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Quote from: DooMAD on February 06, 2021, 03:45:12 PM

At the time of writing, it says 121,076 WBTC is in circulation. How can that be possible?

Well I took time to calculate the Bitcoin balance in their custodial Bitcoin addresses and the amount is so close to what CMC is reporting (121,009.725 BTC). The difference is just 66 BTC, perhaps due to the incoming and out going transactions

The information about their custodial addresses and transactions to prove that their token is backed by that much BTC can be found here - https://wbtc.network/dashboard/audit

Quote from: DooMAD on February 06, 2021, 03:45:12 PM

The Lightning Network only has ~1,075 BTC circulating, so I don't see why over 100x more would be locked up up in some ETH farcecoin. Either CMC is wrong or someone is printing that stuff out of thin air.

While I am not so much into the DeFi and tokenized Bitcoin craze, It seems to have gathered a lot of attention among many crypto folks. So, I think the low figures are because Lightning network isn't that popular. For example, I must admit that I have never used it and don't know how it even works despite knowing some basics about Bitcoin for some few years now.

DooMAD

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Quote from: JeromeTash on February 06, 2021, 03:14:45 PM

The WBTC you actually see on coinmarketcap is equivalent to locked Real Bitcoin

At the time of writing, it says 121,076 WBTC is in circulation. How can that be possible? The Lightning Network only has ~1,075 BTC circulating, so I don't see why over 100x more would be locked up up in some ETH farcecoin. Either CMC is wrong or someone is printing that stuff out of thin air.

Swordsoffreedom

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WBTC is not Bitcoin, it is an ERC20 based token. As the pegged price of WBTC is same as Bitcoin that's why they claimed that you can use WBTC as an alternative way instead of using BTC. You can't use BTC on any DEX network directly but by holding WBTC now it is possible to use this erc20 token as an alternative of Bitcoin.
I don't know how many people are using this service to use their Bitcoin alternatively on Etherium smart contract, and how trustworthy is it. But It is confirmed WBTC is not Bitcoin and I don't think it would be so much popular.

JeromeTash

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WBTC works like this. I have 1 BTC and if I need 1 WBTC, the issuer of WBTC takes the real 1 BTC from me and then mints 1 WBTC and issues it to me. When i no longer need the 1 WBTC, I can swap it from my real 1 BTC and the WBTC I had gets burned by the issuer's smart contract. So WBTC has no impact on Bitcoin's circulating supply except tools like coinmarketcap might misinterpert the data.

The WBTC you actually see on coinmarketcap is equivalent to locked Real Bitcoin

@renegadetrader has an excellent point.

bL4nkcode

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Yeah, I just noticed that when bitcoin starts soaring above 30k. What I guess that it's an only representation or pegged of the bitcoin on ethereum blockchain, much more for dapp exchanges which they can easily swap this token to another.

But there are still lots of questions about this.

renegadetrader

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Supposedly wrapped bitcoin is pegged one a one to one basis to real bitcoin, you cannot create wrapped bitcoin out of thin air you have to tie up real bitcoin. So if anything it would increase demand for real bitcoin. This is supposed to be all verifiable and auditable as well that the bitcoin are actually tied up and if you want to get your real bitcoin back the WBTC has to be burned. At least this is according to what I've read.

RapTarX

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Well, it seems I can't share my point of view exactly. Imagine, someone has purchased 1 wrapped bitcoin. Take all the other factor constant. Now, if he can exchange the wrapped bitcoin for the same amount of USD/BTC anytime, there's no difference between holding 1 BTC and/or holding 1 WBTC; as you can liquidate both anytime with the same amount worth of 1 BTC.
Now, from where that 1 WBTC is coming? It’s acting same as the BTC. Say, in a regular market, the demand of BTC is 100 BTC. If out of that demand, 10 BTC demand is fulfilled by WBTC, isn’t the value of BTC decreasing?
I don't know if WBTC issuer have BTC backed for each WBTC. If so, then it’s fine and there's nothing wrong but if it’s not then I guess it’s decreasing the value of BTC at the end of day.

hatshepsut93

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Bitcoin is Bitcoin and WBTC is WBTC. I don't count wrapped Bitcoin as real Bitcoin, so I don't see how it affects Bitcoin's supply. This isn't a government system where everyone have to use an IOU and trust that it's still 1:1 - we have a choice to use Bitcoin itself instead of IOU Bitcoin.

I think wrapped Bitcoin should only be used for some experimental DeFi trading and never as a currency or store of value, but even then there are technologies like atomic swaps that require less trust.

RapTarX

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Quote from: DooMAD on February 05, 2021, 01:40:16 PM

There's no impact on Bitcoin's supply if they are printing these tokens from nothing, though.

If they have say 100000 WBTC in circulation. Technically, this WBTC is another form of a token and serving as BTC according to its value. Isn't it then increasing the circulation of BTC technically as more WBTC is there? I know there's no new coin will be mined but that WBTC is also the same actually. Nevertheless, if this token is backed by bitcoin, only then they are ok to use or mine.

DooMAD

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Certainly appears to involve a greater level of trust than I'm prepared to afford it. I do find it difficult to believe there's almost 120000 BTC tied up in this thing. There's no impact on Bitcoin's supply if they are printing these tokens from nothing, though. They're two very separate things.

RapTarX

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What TF is WBTC? I guess it's the tokenization of Bitcoin and if I'm correct there are a few such tokens backed by/ pegged to Bitcoin. But do the issuer have such enough amount of Bitcoin as they print (mint)? Shouldn't enough BTC be staked in order to create such a token? I don't know how much token works, whether they have BTC backed or not.
But the question I'm thinking about for the last few days-
If there is no enough BTC backed by the issuer, isn't the supply getting increased day by day?

Topic: Wrapped Bitcoin and its affect on supply (Read 112 times)