21.co, the parent company of 21Shares, announced on September 3 the launch of its Wrapped Bitcoin product (21BTC) on the Ethereum blockchain. The company collaborated with Flow Traders, a prominent global market maker, to create a product that offers users enhanced security as they navigate decentralized applications and explore new opportunities on the Ethereum network.
A Unique Approach to Wrapped Bitcoin
21.co’s 21BTC sets itself apart from other market offerings by securely storing the underlying assets in cold storage, eliminating the necessity for a bridge. Eliezer Ndinga, head of strategy and business development at 21.co, emphasized the company’s commitment to best practices in asset management and operational excellence, bringing these strengths into the realm of wrapped assets with institutional-grade custodians and robust security protocols.
The Mechanics of Bitcoin Wrappers
Bitcoin wrappers, like 21BTC, are ERC-20 tokens issued on various blockchains and backed one-to-one by Bitcoin. These tokens are held by a centralized custodian. To redeem, token holders burn the tokens to receive native BTC, while minting requires depositing native Bitcoin to obtain the tokens.
Challenges for WBTC Amid 21BTC Launch
The launch of 21BTC comes at a time when Wrapped Bitcoin (WBTC), the most widely used Bitcoin wrapper, is facing significant challenges. With a market capitalization of around $9 billion, WBTC has recently been under increased scrutiny due to complications involving BitGo and TRON founder Justin Sun. On August 9, BitGo announced its intention to transfer control of WBTC to a joint venture with crypto custody platform BiT Global and Sun, sparking concerns within the community, particularly about Sun’s involvement.
Impact on WBTC’s Market Position
In response to these concerns, the lending protocol Sky (formerly MakerDAO) decided to restrict new users from borrowing against WBTC, leading to a decline in demand for the asset. Data from Dune Analytics revealed that WBTC’s supply decreased by over 1,000 tokens last month, marking the third-largest monthly decline this year.
Competitors Eyeing BitGo’s Market Share
As WBTC faces these challenges, several competitors, including Coinbase, are aiming to challenge BitGo’s dominance in the market. Additionally, the DeFi protocol Threshold has proposed merging its BTC wrapper token, tBTC, with WBTC in an effort to bolster the more popular Bitcoin product.
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