Wrapped Bitcoin supply declines to negative, here’s why
In a significant development, the supply of Wrapped Bitcoin (wBTC) has fallen to a negative value after a significant burn of 11,500 wBTC. The burn was linked to Celsius, a decentralized financial platform that offers lending and borrowing services for cryptocurrency.
The combustion was executed by Celsius as part of the ongoing effort to reduce the supply of wBTC and increase its scarcity. A total of 11,500 wBTC tokens were destroyed, which the team sent to an address without a private key, effectively removing them from circulation.
Meanwhile, the total supply of wBTC is over 164,000, with a monthly growth of around -7.39%.
Wrapped Bitcoin supply goes negative
After the burn, the supply of wBTC has fallen to a negative value, meaning that fewer wBTC coins are left to investors and the wider community. This move aims to push the token’s price up, as demand tends to increase due to high scarcity.
This burning is a positive development for the cryptocurrency ecosystem as a whole. The reduced supply of wBTC will make it more valuable and increase its appeal to investors and traders seeking a scarce resource with a strong use case.
If this move proves positive, the team may continue to burn the wBTC tokens in the coming months. This will be part of efforts to increase token scarcity and support the long-term value of users’ investments.
The platform has also stated that it will work with other decentralized finance platforms to encourage them to participate in efforts to reduce the supply of wBTC and increase its value.
Primarily, the wBTC burn is likely to have a lasting impact on the value and appeal of the token. However, it remains to be seen how other decentralized financial platforms will react to the burning and whether they will participate in the effort to reduce the Wrapped Bitcoin supply.
wBTC as an ERC-20 token
Wrapped Bitcoin is an example of an ERC-20 (Ethereum) token, but aims to mirror the value and price of BTC. The token appeared in 2018 of major developers including Bitgo, Ren (a blockchain interoperability protocol) and Kyber, a multi-chain liquidity platform. The Decentralized Autonomous Organization (wBTC DAO), with around 30 members, undertakes to manage and oversee transactions with the token.
Exchanging BTC for Wrapped Bitcoin usually begins with a burn transaction and notification of custodians, according to the sellers. The sellers identify a locked BTC blockchain escrow address and transfer real tokens. After the real Bitcoin reaches the address, it mints the token, bringing it to the same level as wBTC on the Ethereum network.
As an Ethereum-based token, wBTC’s transactions are usually faster. But that is not the whole advantage. wBTC is integrated into Ethereum wallets, enabling interaction with smart contracts and decentralized applications.
Featured image from Pixabay and chart from Tradingview.com
