WBTC Supply Shrinks by Record Amount

DEC 20, 2022 • 4 Min Read

Craig Sweney

🌅 Welcome!

BlockFi is may restart withdrawals for certain customers while FTX considers asking third parties to voluntarily return past payments, potentially including political donations.

Today, we take a look into the shrinking WBTC supply while our Research team provides insights into account abstraction on Ethereum.

This is the Delphi Daily. Let’s dive in.

🚨 In Case You Missed It

  • BlockFi seeks a US court order to allow certain customers to withdraw assets.
  • FTX considers retrieving voluntary payments previously made to third parties, including political donations.
  • Visa explores options to allow automatic payments via Ethereum wallets without requiring manual transaction signing.
  • Coinbase share price hits an all-time low.

📊 WBTC Supply Shrinks by Record Amount

  • In November, a total of 30.6K WBTC was redeemed, the highest amount ever since the token was launched. Since then, WBTC supply has shrunk by over 24%. Currently, December is on track to surpass this record with 29.1K WBTC redeemed so far.
  • The largest daily redemption of WBTC took place on Dec. 15, 2022, when 13.6K WBTC (worth $239M) were burned. In fact, three of the four largest daily redemptions ever occurred in December, all of which were carried out by market maker Wintermute.
  • WBTC is an ERC-20 token that is backed on a 1:1 basis by BTC. The collateral backing WBTC is held in custody by BitGo. The minting and redemption of WBTC is carried out by approved merchants that are typically market makers and exchanges.
  • The transparency of WBTC has helped the project gain widespread adoption and confidence. Users can easily verify the supply of WBTC vs. the amount of BTC held in custody with on-chain data.
  • This minimizes the possibility of a “bank run” on WBTC due to a crisis of confidence. Market participants are likely converting WBTC to BTC to sell the tokens or custody the BTC themselves.

⚡ The Year Ahead for Infrastructure

  • The UX of self-custody continues to be one of the primary reasons why people prefer centralized solutions. Two ways to improve this issue are smart contract wallets and MPC wallets.
  • There are two account types on Ethereum: externally owned accounts (EOAs) controlled by private keys and smart contract accounts controlled by code. All transactions must originate from an EOA and may trigger smart contracts that execute arbitrary code.
  • The Ethereum community has been working on this limitation for years, and this endeavor can be summarized as account abstraction. EOA and smart contract accounts become unified under AA.
  • For transactions to be mined on-chain, they must conform to some validity rules such as a proper nonce, gas amount, signature, and syntax. Currently, these validity rules are fixed and not programmable. AA will bring programmability to transaction validity rules.

  • Under AA, smart contracts not only determine the effects of transactions but can also determine whether or not they are valid and thus be the agents that authorize them.
  • Without native AA support, even the simplest UX needs aren’t possible for on-chain users. A typical Ethereum user has to sign three different transactions via MetaMask to LP on Uniswap – two to approve tokens and a third one to deposit them.
  • Smart contract wallets, combined with native AA, remove these frictions and many others. AA will give the end user a dramatic improvement in UX without sacrificing self-custody. 

  • MPC wallets allow multiple parties to collectively operate a public-private key pair without a single point of failure. The private key is split, encrypted, and held among multiple parties as secret shares.
  • A signature generated using MPC is indistinguishable from a signature generated by an EOA. Therefore, MPC wallets don’t need to wait for advances in AA to reach their full potential and don’t have extra gas overhead compared to EOAs.
  • MPC solutions are also domain-agnostic and can easily be applied to all chains and be extended to Web2 platforms.
  • In the last two years, significant funding has been applied to new forms of MPC solutions catering to crypto users. These solutions can best be defined as decentralized MPC-based key-management networks. Examples include Lit Protocol, Entropy, and Odsy.
  • For more on prominent themes in web3 infrastructure, Delphi members can read our Delphi Pro report here.

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