Demand for Wrapped Bitcoin (wBTC) has grown tremendously in recent weeks, with more than 23,100 wBTC (USD 274 million) currently in circulation.
According to data from FlipsideCrypto, a provider of digital asset data, more than half of these wBTCs were issued last month when the decentralized financial sector experienced record growth.
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Launched in 2019, wBTC is an ERC-20 token linked to the Bitcoin price (BTC). It allows users to apparently transfer Bitcoin to the Ethereum network and interact with smart contracts.
To obtain wBTC, users must go to an authorized dealer who will retain the user’s BTC and exchange it for wBTC tokens. Traders can coin and burn wBTC tokens as needed.
The growing demand for wBTC shows that Bitcoin users are looking for high-performance options to maintain Bitcoin. According to a recent report from Genesis, a leading digital currency broker, institutional clients are also showing similar interest.
While there is a growing interest in wBTC, its growth is also being inflated by the phenomenon of yield farming, as more than half of all wBTCs in circulation are currently locked into the DeFi, Compound lending protocol.
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Yield farmers value privacy
wBTC is by far the most popular Bitcoin-backed token used on the Ethereum network, but it is also a centralized option that requires users to go through a know-your-customer procedure and use a third-party escrow service. For some potential users, this raises privacy and censorship concerns.
While institutional interest in DeFi has been growing and even central banks are beginning to get involved, many users are people who may want to remain anonymous while using wBTC.
As such, demand for RenBTC, a decentralized and anonymous alternative to Wrapped Bitcoin, has also increased.
RenBTC is similar to wBTC but features reliable storage for blocked Bitcoin. This allows users to fully own their asset and remain anonymous in the process.
While not all DeFi protocols accept renBTC, this token can also be exchanged for wBTC and used to access DeFi protocols such as Compound, which only accept the latter.
According to Flipside Crypto, 19% of all new addresses that used wBTC in August bought wBTC through renBTC. This shows that privacy can be a driver for further growth in the DeFi sector.