21Shares Introduces Wrapped Bitcoin 21BTC on Ethereum Amid Challenges with WBTC

21.co, the parent company of 21Shares, has recently unveiled its Wrapped Bitcoin product (21BTC) on the Ethereum blockchain, as per a statement released on September 3. This move signifies a strategic collaboration with Flow Traders, a prominent global market maker, to introduce a product that offers customers a sense of security as they delve into decentralized applications and new possibilities on the Ethereum blockchain.

The distinguishing feature of 21.co’s 21BTC is its approach to securely storing the underlying assets in cold storage, eliminating the necessity for a bridge. Eliezer Ndinga, the head of strategy and business development at 21.co, emphasized the company’s commitment to applying stringent asset management best practices and operational excellence to the realm of wrapped assets, involving institutional-grade custodians and security protocols.

Bitcoin wrappers, such as ERC-20 tokens backed by BTC, are issued on various blockchains, backed one-to-one by BTC, and held by a centralized custodian. Holders can redeem these tokens by burning them to receive native BTC, while minting involves depositing native Bitcoin to obtain the tokens.

The launch of 21BTC comes at a time when WBTC, the most popular Bitcoin wrapper with a market capitalization of approximately $9 billion, faces challenges. Recent scrutiny surrounding WBTC has been fueled by issues involving BitGo and TRON founder Justin Sun. BitGo’s announcement on August 9 about transferring control of WBTC to a joint venture with crypto custody platform BiT Global and Sun has raised concerns within the community, particularly regarding Sun’s involvement in the project.

In response to these developments, the lending protocol Sky (formerly MakerDAO) voted to halt new users from borrowing against WBTC, leading to a decline in demand for the asset. Data from Dune Analytics indicates a decrease in WBTC’s supply by over 1,000 tokens last month, marking the third-highest monthly negative change this year.

As a result, competitors like Coinbase are positioning themselves to challenge BitGo’s market dominance. Additionally, DeFi protocol Threshold has proposed merging its BTC “wrapper” token, tBTC, with WBTC to address centralization concerns and potentially salvage the more popular BTC product.