Glossary

Wrapped Bitcoin (wBTC)

An ERC-20 token on Ethereum that represents Bitcoin 1:1, requiring a custodian to hold the underlying BTC.

What is Wrapped Bitcoin?

An ERC-20 token on Ethereum that represents Bitcoin 1:1, requiring a custodian to hold the underlying BTC. Lygos never wraps, bridges, or converts your Bitcoin. Your collateral remains native BTC on the Bitcoin blockchain at all times: not wBTC, not a receipt token, not a representation on another chain. This eliminates the bridge risk, custodian risk, and smart contract risk that wrapped assets introduce. When your loan is repaid, you receive your original native Bitcoin back.

Full Definition

Wrapped Bitcoin (wBTC) is an ERC-20 token on the Ethereum blockchain that is pegged 1:1 to Bitcoin. For each wBTC in circulation, one BTC is held in custody by a centralized custodian (historically BitGo). wBTC was created to bring Bitcoin's liquidity into Ethereum's DeFi ecosystem, allowing BTC holders to use their Bitcoin in Ethereum lending protocols, DEXs, and yield farming. However, wBTC introduces significant trust assumptions: you must trust the custodian to maintain the 1:1 peg, not rehypothecate the underlying BTC, and remain solvent. Regulatory changes to wBTC's custodian structure in 2024 raised further concerns about centralization risk.

How Lygos Uses This

Lygos never wraps, bridges, or converts your Bitcoin. Your collateral remains native BTC on the Bitcoin blockchain at all times: not wBTC, not a receipt token, not a representation on another chain. This eliminates the bridge risk, custodian risk, and smart contract risk that wrapped assets introduce. When your loan is repaid, you receive your original native Bitcoin back.

How Lenders Compare

LygosLednNexoUnchained
TechnologyDiscreet Log Contracts (Bitcoin-native)Centralized custodyCentralized custody2-of-3 multisig (manual)
CustodyNon-custodial (DLC)CustodialCustodialCollaborative multisig
Rehypothecation0% (impossible by design)100%. Your BTC may be lent outYes, platform re-lends assetsNo

Why this matters for borrowers

Understanding Wrapped Bitcoin (wBTC) helps you evaluate how different platforms handle your Bitcoin. Not all custody models are equal, and the technical details determine whether your BTC is truly safe.

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