Wrapped Bitcoin Brings Institutional-Grade Collateral to Onchain Lending
Onchain lending platforms need collateral that can be valued, monitored, transferred, liquidated, and redeemed under stress. Bitcoin (BTC) has the necessary depth, recognition, and global liquidity to serve as foundational collateral. However, native BTC cannot enter onchain credit markets due to its lack of a programmable execution environment.
Wrapped BTC is designed to close this gap by creating a tokenized version of BTC that can be used as collateral. This wrapper holds the underlying BTC in custody and issues a separate token, backed 1:1 by the BTC, on a programmable chain. The token can then move through smart contracts without having to sell the underlying BTC.
Circle's Wrapped Bitcoin (cirBTC) is an example of this design. It applies institutional discipline to each control required for blue-chip collateral, including identifiable and separately held backing assets, clear operating models, reserve information updates, liquidity support, and issuer incentives that favor distribution across venues.