Project: Wrapped Bitcoin (Token: WBTC) – Unlocking Bitcoin’s Liquidity in the DeFi Ecosystem  

Prepared for: Top-tier Venture Capital & Family Office Investors

Date: July 14, 2025

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Part 1 / Page 1

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1A. Overview of Wrapped Bitcoin (WBTC)

Introduction to Wrapped Bitcoin (WBTC)

Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin (BTC) created on the Ethereum blockchain, designed to enable Bitcoin holders to participate in decentralized finance (DeFi) without leaving the Bitcoin ecosystem. WBTC was introduced in January 2019 through a collaborative effort between BitGo, Kyber Network, and Ren, aiming to solve the issue of Bitcoin's limited use within Ethereum-based decentralized applications (dApps). By wrapping Bitcoin into an ERC-20 token, WBTC allows Bitcoin’s liquidity to flow into Ethereum-based decentralized exchanges (DEXs), lending protocols, and other financial services typically unavailable to Bitcoin holders (WBTC Official Website).

WBTC functions as a bridge between the Bitcoin and Ethereum ecosystems, offering Bitcoin holders the opportunity to utilize their Bitcoin assets in Ethereum’s rapidly growing DeFi space. The token is fully backed by Bitcoin in a 1:1 ratio, with each WBTC token being supported by an equivalent amount of Bitcoin held in reserve by trusted custodians like BitGo (BitGo Website).

The adoption of WBTC is part of a broader trend of tokenizing assets to unlock liquidity and interoperability across different blockchain ecosystems. As Bitcoin remains the leading cryptocurrency by market capitalization, WBTC’s introduction is seen as a significant step toward integrating Bitcoin into the broader DeFi market.

Mission: What is the Core Purpose of WBTC?

The core mission of Wrapped Bitcoin (WBTC) is to bring Bitcoin’s liquidity to the Ethereum blockchain, thus facilitating Bitcoin’s participation in decentralized finance (DeFi). Bitcoin, although widely recognized as the leading cryptocurrency, has limited use in decentralized applications due to its lack of smart contract functionality. Through WBTC, Bitcoin holders can leverage their Bitcoin assets to interact with a myriad of DeFi services on Ethereum, such as decentralized exchanges, lending platforms, yield farming, and more.

The primary goal is to bridge the gap between two of the most important blockchain ecosystems—Bitcoin and Ethereum—by creating a token that allows Bitcoin to be used within Ethereum’s thriving decentralized applications (Cointelegraph).

Moreover, WBTC provides a fully-backed token that adheres to a transparent and verifiable custody model, ensuring that Bitcoin holders can trust that each WBTC token is truly backed 1:1 by Bitcoin, which is held in reserve by regulated custodians like BitGo (BitGo Blog).

Vision: Where Does WBTC See Itself in the Long-Term Future?

Wrapped Bitcoin’s long-term vision is to establish itself as the leading tokenized asset for Bitcoin within the DeFi ecosystem. By facilitating the use of Bitcoin in smart contracts on Ethereum, WBTC aims to ensure that Bitcoin holders can actively participate in the decentralized financial ecosystem without sacrificing the inherent security and value of Bitcoin.

WBTC is poised to become a core component of the DeFi ecosystem as the market for decentralized finance continues to expand. It envisions increasing its adoption by enhancing its cross-chain interoperability, allowing Bitcoin to participate not only on Ethereum but potentially on other blockchains that support smart contracts and DeFi applications, such as Solana or Polkadot.

Additionally, as the DeFi market evolves, WBTC plans to further decentralize its operations by introducing multiple custodians and improving the transparency of its custodial model. This decentralization could help address scalability concerns and broaden the ecosystem’s reach, enabling Bitcoin holders to access an ever-expanding array of decentralized services (Ethereum Foundation).

Unique Selling Proposition (USP): What Makes WBTC Different from Competitors?

Wrapped Bitcoin’s unique selling proposition (USP) lies in its ability to bring Bitcoin’s liquidity into Ethereum’s smart contract ecosystem while ensuring full 1:1 backing by Bitcoin held in reserve. The project differentiates itself from other tokenized Bitcoin solutions by emphasizing:

1. 1:1 Bitcoin Backing: Each WBTC token is fully backed by one Bitcoin held in reserve by a trusted custodian, typically BitGo. This ensures that WBTC tokens retain their value and integrity, unlike some non-collateralized stablecoins or unverified wrapping solutions (WBTC Documentation).
   
   
2. Custodial Model with Transparency: WBTC employs a custodial model, where Bitcoin is securely held by trusted third-party custodians like BitGo, offering users a transparent and verifiable mechanism to ensure the 1:1 backing of WBTC tokens. Unlike some decentralized projects, which lack the necessary transparency and security, WBTC's custodial approach builds trust and credibility in the system (BitGo Custodianship).
   
   
3. Ethereum Interoperability: WBTC is built as an ERC-20 token, which means it is natively compatible with Ethereum-based decentralized applications (dApps). This interoperability allows Bitcoin holders to participate in a wide range of DeFi platforms, from lending protocols to decentralized exchanges (Kyber Network).
   
   
4. Growing Ecosystem Adoption: WBTC has seen significant adoption across leading Ethereum-based DeFi platforms such as Uniswap, Aave, and MakerDAO. This growing ecosystem of integrations ensures that WBTC is not only useful but also essential in bridging Bitcoin’s liquidity into DeFi. As Bitcoin’s role in DeFi continues to expand, WBTC stands to benefit from the increasing demand for tokenized Bitcoin liquidity (DeFi Pulse).
   
   
5. Transparency and Auditability: The reserve of Bitcoin backing WBTC tokens is publicly verifiable through regular audits. This transparency sets WBTC apart from other crypto assets that might be opaque about their reserves. Regular third-party audits provide assurance that each WBTC token is fully backed by Bitcoin, making it a trusted asset for DeFi users (WBTC Network Stats).
   

Technology: Blockchain and Consensus Mechanism

WBTC leverages the Ethereum blockchain, one of the most widely used blockchains for decentralized applications and smart contracts. Ethereum’s flexible platform allows for the seamless integration of WBTC as an ERC-20 token. Ethereum’s Proof-of-Stake (PoS) consensus mechanism, introduced through the Ethereum 2.0 upgrade, offers significant advantages in terms of scalability and energy efficiency compared to its previous Proof-of-Work (PoW) mechanism. With Ethereum 2.0’s PoS, Ethereum’s transaction throughput has increased, which benefits platforms like WBTC that need efficient, scalable transaction processing.

The PoS consensus mechanism is central to Ethereum’s ability to support large-scale applications and services, and by using Ethereum’s blockchain, WBTC can interact with Ethereum-based decentralized applications (dApps) without encountering the scalability limitations that might hinder Bitcoin’s own blockchain. The PoS mechanism improves transaction speeds and reduces costs, benefiting WBTC’s users by enabling more seamless transactions for DeFi activities like yield farming and staking on Ethereum (Ethereum.org).

Market Problem: What Specific Problem is WBTC Solving Within the Market?

WBTC addresses the key challenge of bringing Bitcoin’s liquidity into Ethereum’s smart contract ecosystem. Before WBTC, Bitcoin holders had limited opportunities to leverage their Bitcoin holdings within decentralized applications. While Ethereum has long been the home of DeFi, Bitcoin, being a non-programmable asset, was excluded from participating in Ethereum-based dApps, such as decentralized exchanges, lending protocols, and decentralized finance applications. This gap left Bitcoin holders with fewer options for using their Bitcoin beyond traditional exchanges or as a store of value.

By creating WBTC, the project solves this problem by enabling Bitcoin holders to directly interact with DeFi, giving them access to services such as lending, staking, and yield farming, all while keeping their exposure to Bitcoin intact. As the DeFi market continues to grow, the demand for tokenized Bitcoin is expected to increase, furthering WBTC’s value proposition (CoinDesk).

Primary Beneficiaries

The primary beneficiaries of Wrapped Bitcoin include:

1. Bitcoin Holders: Individuals who wish to engage with DeFi without selling or converting their Bitcoin can leverage WBTC to participate in decentralized financial services without losing their exposure to Bitcoin’s price fluctuations.
   
   
2. Ethereum-based DeFi Platforms: DeFi applications on Ethereum benefit from the addition of Bitcoin liquidity, which enhances market efficiency and enables the creation of more robust financial products.
   
   
3. Institutional Investors: Investors looking for Bitcoin-backed assets within DeFi ecosystems can use WBTC to integrate Bitcoin into their decentralized strategies, such as decentralized lending, borrowing, and liquidity provision, without needing to convert Bitcoin to Ethereum or other tokens.
   
   
4. Developers and Protocol Creators: Developers integrating WBTC into their decentralized applications can provide more diverse financial products that appeal to Bitcoin holders, potentially attracting a broader user base.
   
   

In conclusion, WBTC’s introduction has solved a critical issue for the DeFi ecosystem by bringing Bitcoin’s liquidity onto Ethereum. Its unique offering has positioned WBTC as a crucial player in the evolving decentralized finance landscape. By maintaining Bitcoin’s value and offering access to Ethereum-based decentralized services, WBTC has created new opportunities for Bitcoin holders and Ethereum developers alike (WBTC Documentation).

1B. Key Investment Highlights

Market Potential: What is the Market Size and What Percentage of the Market Can This Project Capture?

The market for tokenized Bitcoin, particularly within decentralized finance (DeFi), is expanding rapidly. As of 2023, Bitcoin remains the largest cryptocurrency by market capitalization, valued at over $500 billion (CoinMarketCap). Despite Bitcoin’s dominant position, it has been traditionally excluded from DeFi applications on Ethereum due to its lack of smart contract compatibility. WBTC addresses this gap by enabling Bitcoin holders to bring their liquidity into the Ethereum ecosystem, making Bitcoin an integral part of the rapidly growing DeFi space.

In the broader crypto and DeFi markets, WBTC has become a significant player. According to DefiPulse, Ethereum-based DeFi platforms have seen explosive growth, surpassing $200 billion in total value locked (TVL) as of early 2023 (DeFi Pulse). WBTC has consistently ranked among the top assets in terms of TVL in Ethereum DeFi protocols, with over $4 billion in WBTC currently locked in various applications such as Aave, MakerDAO, and Uniswap (WBTC Network Stats).

Given that Bitcoin’s market capitalization continues to rise, and the DeFi market is projected to grow significantly in the coming years, the potential for WBTC to capture a larger share of the Bitcoin liquidity within the Ethereum ecosystem is substantial. The token’s potential market share will depend on both the continued adoption of DeFi protocols and Bitcoin’s ability to maintain its status as the world’s leading cryptocurrency.

The expansion of Layer 2 solutions and cross-chain interoperability also plays a crucial role in increasing the reach and utilization of WBTC, making it a critical asset as decentralized finance continues to grow. As the DeFi ecosystem matures, WBTC’s position as the primary conduit for Bitcoin liquidity into Ethereum-based protocols positions it to capture a significant portion of the market.

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