21Shares Introduces Ethereum-Based Wrapped Bitcoin (21BTC)
21Shares, a well-known name in the cryptocurrency world, has launched a new product called 21BTC on the Ethereum blockchain, according to a statement released on September 3rd. This initiative is spearheaded by 21.co, the parent company of 21Shares, in collaboration with Flow Traders, a prominent global market maker. The goal is to provide users with a secure and trustworthy way to engage with decentralized applications and uncover new opportunities within the Ethereum blockchain.
What Are Wrapped Bitcoins?
Wrapped Bitcoins, like 21BTC, are essentially ERC-20 tokens backed one-for-one by actual Bitcoin. These tokens are issued on blockchains such as Ethereum and are managed by a centralized custodian who holds the corresponding BTC. The process of minting involves depositing real Bitcoin to receive the wrapped tokens, while redeeming requires burning the tokens to get back native Bitcoin.
Key Features of 21BTC
21BTC sets itself apart from other similar products by ensuring that the underlying assets are securely stored in cold storage, thus removing the need for a bridge. This aspect provides additional security and peace of mind for users. Eliezer Ndinga, head of strategy and business development at 21.co, emphasized the company's commitment to bringing best practices in asset management and operational excellence to the realm of wrapped assets, employing institutional-grade custodians and security protocols.
Challenges Faced by WBTC
The release of 21BTC comes at a time when the most popular Bitcoin wrapper, WBTC, is experiencing difficulties. With a market capitalization of about $9 billion, WBTC has been under scrutiny due to issues involving BitGo and TRON founder Justin Sun. On August 9th, BitGo outlined plans to hand over control of WBTC to a joint venture with crypto custody platform BiT Global and Sun, raising alarm within the crypto community.
In reaction, the lending protocol Sky (formerly known as MakerDAO) decided to restrict new users from borrowing against WBTC, leading to a decline in its demand. According to Dune Analytics, WBTC's supply dropped by over 1,000 tokens last month, marking the third-highest monthly decrease this year.
Market Response and Competition
The challenges faced by WBTC have opened doors for competitors. Companies like Coinbase are looking to challenge BitGo's dominance in the market. Additionally, the DeFi protocol Threshold has proposed the merging of its BTC wrapper token, tBTC, with WBTC to potentially salvage the more popular BTC product.
Conclusion
The introduction of 21BTC by 21Shares marks a significant development in the landscape of cryptocurrency wrapped assets. By focusing on security and reliability, 21BTC seeks to provide an attractive alternative to WBTC and other Bitcoin wrappers facing scrutiny.
