What happens to wrapped Bitcoin on Ethereum?

An important "wrapped" symbol almost disintegrated last week - the latest cryptocurrency producer to suffer the effects of the previously dominant FTX exchange, which collapsed earlier this month. 

For those who don't know, wrapped bitcoin (and BTC) is the 23rd largest cryptocurrency with a market capitalization of $3.5 billion. It runs on Ethereum, the leading blockchain for divi and NFS, a token that is supposed to represent bitcoin. 

The idea - basically - with wptk is that traders who want to use their bitcoin assets in the Ethereum ecosystem can do so with tokens that are mutually supported by bitcoin. This is the way Bitcoin holders can interact with Defi tools without spending more money on Ethereum or other Ethereum-based tokens.

It is an important tool in the world of decentralized financial products that allows its users to borrow, borrow or trade digital assets without third-party intermediaries. According to koinjiku, over 88 million tokens and BTC have been sold in the last 24 hours. 

But last week, the token was canceled, losing its individual value in relation to bitcoin, the blockchain data processing company Keiko reported. Since the appearance of FTX in early November, wptk has been trading on exchanges at a discount to bitcoin, she said — which should not happen if the token is tied one to one by the largest cryptocurrency. 

"The largest wrapped version of bitcoin on the Ethereum network, BTC, has been trading at a constant discount on bitcoin since mid-November, falling to -1.5% on Friday," the company wrote in a blog post on Monday. 

"While one bitcoin should always be exchanged for one bitcoin through authorized dealers, the token is also traded on open markets, which means that its price relative to bitcoin may fluctuate.”

The company added that charts posted on Twitter claimed that the bankrupt trading company Alameda Research was the largest trader in the world who believed that the token could not actually be backed by bitcoin reserves. That's not true, Kaiko said, adding that stocks can be "confirmed down the chain.”

Alameda Research was created by former FTX CEO Sam Bankman Freed. She quarreled with FTX after it became clear that the client's funds from the exchange were being used by a trading company, which was ultimately unavailable. 

The crypto incubation company BitGo is the main trustee of wptk. Chief executive Chen Fang said on Twitter that the rumors not supported by bitcoin were "fake news." BitGo did not respond to a request for comment. 

Kiran Mesquita, developer of the Devi railgun Privacy Project, told decrypt that debugging is not something to worry about at the moment. 

"The price of bitcoin has not dropped significantly (~ 2% at its peak, which was quickly restored), until this happens, it will continue to act as a means of attracting bitcoin to decentralized finance on Ethereum," he said. 

At the moment, the World Trade Bank has returned to linking bitcoin - something that, according to Kaiko, "undoubtedly suits Defi investors." 

But Mesquita added that the loss of binding to WTC could lead to greater decentralization in the space, given that the main custodian of assets is BitGo, a centralized company. "In the long run, if the company does not regain its credibility, it will most likely be replaced by a more decentralized alternative," he said.