Bitcoin vs. Wrapped Bitcoin: What investors need to know in 2025
Jul 30, 2025・6 min read
Unless you’ve been off the grid for the last decade or so, you’ve probably heard of Bitcoin (BTC).
Wrapped Bitcoin (WBTC), on the other hand, might be less familiar. But it’s just as important for understanding the evolving crypto market, especially in the world of decentralized finance (DeFi) and newer cryptocurrencies.
Though both represent the value of the world’s leading cryptocurrency, they operate on different blockchains, serve different use cases, and cater to different types of crypto investors.
In this guide, we’ll compare Bitcoin versus Wrapped Bitcoin, unpacking how they work, when to use them, and how to decide which belongs in your crypto portfolio.
What’s Bitcoin (BTC)?
Bitcoin is the original and best-known cryptocurrency, launched in 2009 by the pseudonymous Satoshi Nakamoto. Designed as a peer-to-peer (P2P) digital cash system, Bitcoin runs on a decentralized public ledger known as the blockchain, removing the need for banks, governments, or any central authority. Today, it remains the foundation of the global cryptocurrency market.
The Bitcoin network has a fixed supply of 21 million coins hard-coded into its protocol. It uses a proof-of-work (PoW) consensus mechanism, where miners compete to solve cryptographic puzzles and add new blocks to the chain. Each block contains a record of transactions, and new BTC are minted with each one – roughly every 10 minutes. Once all 21 million coins have been mined (expected to happen around 2140), no more Bitcoin will enter circulation.
While Bitcoin was originally intended as a decentralized digital currency, it has since earned a reputation as a store of value – often compared to digital gold. Its focus on security and trustless design makes it ideal for holding long-term value, though it’s less suited to complex financial services or smart-contract-driven use cases found in DeFi. Its price and trading activity are widely tracked on platforms like CoinMarketCap’s Bitcoin page and CoinTracker’s BTC price hub, alongside other key metrics like market cap and 24-hour volume.
What’s Wrapped Bitcoin (WBTC)?
Bitcoin helped revolutionize the idea of decentralized currency – and, in doing so, laid the groundwork for decentralized finance (DeFi). The rise of smart contracts on the Ethereum network further accelerated this shift, introducing the ERC-20 token standard and enabling digital assets beyond ETH to operate within Ethereum’s expanding ecosystem.
Here's where Wrapped Bitcoin comes into play. Launched in January 2019 by a consortium including BitGo, Kyber Network, and Ren, WBTC allows BTC holders to bring their crypto assets into Ethereum’s DeFi environment.
Since Bitcoin and Ethereum run on separate blockchains, BTC can’t be used natively on the Ethereum network. To interact with DeFi protocols, decentralized exchanges, or dApps, BTC must go through a process known as wrapping, a form of tokenizing Bitcoin, to make it compatible with smart contract platforms.
In this case, wrapping means locking a specific amount of BTC with a custodian like BitGo and minting an equivalent amount of WBTC – a pegged, 1:1 token that conforms to Ethereum’s ERC-20 standard. This gives Bitcoin’s value interoperability with Ethereum’s DeFi ecosystem, allowing it to be used in smart contracts, as collateral, or in yield strategies across various DeFi platforms.
Each wrapped token is fully backed by real BTC stored in a custody vault, helping the Wrapped Bitcoin price closely mirror that of Bitcoin – though small fluctuations can occur due to market forces or custodial delays. To convert WBTC back into native BTC, users must unwrap it, which effectively burns the token and releases the original Bitcoin.
By creating a bridge between Bitcoin and Ethereum, WBTC makes it possible to use BTC in use cases like lending, margin trading, and liquidity provision – all areas the Bitcoin blockchain can’t support natively due to its limited programmability. Other wrapped versions of Bitcoin include renBTC, tBTC, and sBTC, each offering slightly different trade-offs in terms of interoperability, custody, and decentralization.
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What’s Wrapped Bitcoin vs. Bitcoin? Key differences
Here’s a breakdown of the key differences between Bitcoin and Wrapped Bitcoin:
Which one should you choose?
Ultimately, both BTC and WBTC offer distinct advantages within a diversified crypto portfolio. Choosing between native Bitcoin and Wrapped Bitcoin depends on your goals, risk tolerance, and whether you're prioritizing long-term security, exposure to DeFi, or both. You might hold Bitcoin for its stability and store-of-value appeal, while allocating a portion to WBTC to explore lending, yield farming, or other DeFi opportunities.
Here’s how they compare:
Bitcoin
- True decentralization: Bitcoin runs on a globally distributed network of miners and nodes. Its trustless, peer-to-peer design minimizes counterparty risk and aligns with the ethos of decentralized money.
- Proven security: Backed by its PoW mechanism and unmatched hash power, Bitcoin remains one of the most secure blockchains, with over 15 years of uninterrupted operation and no major breaches.
- Global recognition and adoption: As the most recognized and liquid cryptocurrency, BTC is widely adopted by institutions, governments, and retail investors. It’s easy to buy, sell, and trade across exchanges.
- Best suited for: Long-term holders, supporters of decentralization, and those who prioritize security and sovereignty over programmability.
Wrapped Bitcoin
- Access to DeFi: WBTC unlocks Bitcoin’s value for use in DeFi protocols, including lending, borrowing, and yield farming on platforms like Aave, MakerDAO, and Uniswap. It’s ideal for those seeking passive income or smart contract functionality.
- Faster settlement: WBTC benefits from Ethereum’s faster block times (about 15 seconds versus Bitcoin’s 10 minutes), enabling quicker transactions for DeFi and trading use cases.
- Cross-chain interoperability: Acting as a bridge between Bitcoin and Ethereum, WBTC allows BTC holders to participate in broader blockchain ecosystems without selling their crypto assets. WBTC enables cross-chain access to popular DeFi protocols, helping crypto investors move between ecosystems without liquidating their BTC holdings.
- Best suited for: Active DeFi users, traders, and investors exploring wrapped tokens and interoperability without parting with their BTC.
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FAQs
Is Wrapped Bitcoin (WBTC) safe?
Wrapped Bitcoin (WBTC) is generally considered safe because it’s backed 1:1 by BTC held in reserves. However, it does introduce counterparty risk since a custodian – often a centralized entity – is responsible for managing those reserves. While these reserves are regularly audited, there’s always a small risk of custodial failure, hacks, or mismanagement, unlike with fully decentralized assets like native Bitcoin.
Can I convert WBTC back to BTC?
Yes, converting WBTC back to BTC involves the unwrapping (or burning) process. Users send their WBTC to a designated custodian or merchant, who then burns the WBTC tokens and releases an equivalent amount of Bitcoin from reserves. While wrapping typically comes at no direct cost, unwrapping may incur a small service fee, plus standard Ethereum gas fees.
Is there more than one type of Wrapped Bitcoin?
Yes, WBTC is just one version of wrapped Bitcoin. Other variants offer different trade-offs in security, decentralization, and interoperability. Each version caters to different investor preferences – some prioritize decentralization, others favor institutional backing or cross-chain utility:
- sBTC: Created through the Stacks protocol, sBTC (SBTC) brings trustless DeFi capabilities directly to the Bitcoin blockchain by enabling smart contract functionality.
- cbBTC: Issued by Coinbase, cbBTC (CBBTC) is a centralized alternative that mirrors the WBTC model and is backed by reserves managed by the exchange.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.