What Is Crypto.com’s Wrapped Bitcoin (CDCBTC) and How Does It Work?

CDCBTC is Bitcoin wrapped by Crypto.com that allows users to unlock DeFi opportunities with BTC. Here’s how it works.

What Is Bitcoin?

Before we dive into CDCBTC, let’s recap BTC.

The first cryptocurrency, Bitcoin was introduced in 2009 by an enigmatic figure or group known as Satoshi Nakamoto. This groundbreaking digital currency operates on a decentralised network, eliminating the need for intermediaries like banks or governments. Existing solely in digital form and recorded on a decentralised ledger, Bitcoin has a finite supply capped at 21 million coins. 

The backbone of Bitcoin is blockchain technology, a public decentralised ledger that records all transactions, ensuring transparency and security. New bitcoins (BTC) are created through a process called mining, where powerful computers solve complex mathematical problems.

One of Bitcoin’s key advantages is the ability to send funds globally with speed and relatively low fees compared to traditional international money transfers. Additionally, Bitcoin transactions are linked to addresses rather than personal identities, offering a degree of privacy.

Learn more about Bitcoin here.

What Is Crypto.com Wrapped Bitcoin (CDCBTC)?

CDCBTC is a token backed 1:1 by native BTC held in Crypto.com’s custody solution. In other words, a wrapped Bitcoin is a tokenised version of Bitcoin that operates on blockchains other than the Bitcoin network. 

Eligible Crypto.com users can obtain CDCBTC by withdrawing native BTC from the Crypto.com platform to supported chains (currently on Cronos) and receive native BTC by depositing CDCBTC back to the Crypto.com platform from the supported chains.  

The process of creating CDCBTC involves sending BTC to Crypto.com, which then mints an equivalent amount of CDCBTC on the blockchain network selected by the user. When users want to convert back to Bitcoin, they can ‘burn’ their CDCBTC and receive the corresponding amount of Bitcoin back.

What Is the Difference Between Bitcoin (BTC) and Crypto.com Wrapped Bitcoin (CDCBTC)?

BTC and CDCBTC are both digital assets representing the same underlying value, but they operate on different blockchain networks and serve distinct purposes. 

BTC functions on its native blockchain, offering a decentralised, peer-to-peer (P2P) electronic cash system without intermediaries. It’s mined through a Proof of Work (PoW) consensus mechanism and used as a store of value and medium of exchange, with transactions recorded directly on the Bitcoin blockchain.

CDCBTC is a tokenised version of Bitcoin that operates on blockchains other than Bitcoin, including Cronos, as an ERC-20 token. It’s designed to bridge the gap between Bitcoin and other smart contract platforms, allowing Bitcoin holders to participate in decentralised finance (DeFi) applications. 

This wrapped version enables faster transactions, provides access to smart contract functionality, and offers increased interoperability, plus access to DeFi opportunities.  

How Does CDCBTC Work?

CDCBTC is backed 1:1 by Bitcoin held by Crypto.com. Mint/burn thresholds are set to ensure the underlying BTC backing CDCBTC is always equal to the circulating supply of CDCBTC. 

The exchange process from BTC to CDCBTC is as follows:

Wrap: When users initiate a BTC withdrawal to one of the supported chains, they receive CDCBTC in their destination wallet. Crypto.com will manage the minting/wrapping operation on the backend — native BTC is moved to a dedicated BTC reserve wallet backing CDCBTC before new quantities of CDCBTC are minted on a 1:1 basis.

Unwrap: When users initiate a CDCBTC deposit into their Crypto.com account, the CDCBTC is automatically unwrapped, and they receive native BTC from the dedicated BTC reserve wallet, available for trading or other use cases on the platform.

CDCBTC Use Cases

Bitcoin’s DeFi utilities on its native chain are limited because of a lack of smart contract functionality and compatibility with other chains. CDCBTC aims to enable token holders to unlock BTC’s DeFi capabilities across multiple chains.

These include:

• On-chain trading
• Collateralised borrowing
• Yield farming

Crypto.com offers a seamless and secure way to wrap and unwrap native BTC. Through the Crypto.com platform, users can connect to multiple supported chains. Crypto.com promotes security by having the underlying BTC held in Crypto.com’s Service Organisation Control (SOC) 2 Type II-compliant custodial solution.

CDCBTC is available at launch on Cronos, and Cronos zkEVM soon after, with more chains to come.   

How to Acquire CDCBTC

Crypto.com users can obtain CDCBTC in the Crypto.com App and transfer it seamlessly to their Crypto.com Onchain Wallet (formerly DeFi Wallet). Simply withdraw BTC to a Cronos wallet address, and that Cronos wallet address will receive the CDCBTC. The conversion between BTC and CDCBTC is 1:1 and will be done automatically. 

Below are the step-by-step instructions for minting CDCBTC in the Crypto.com App: 

On the Accounts tab, tap Crypto Wallet > Transfer > Withdraw.

1. Select BTC to withdraw.
2. Select either External Wallet or Crypto.com Onchain. 
3. If External Wallet is selected, tap on ‘+ > Wallet Address’ to whitelist a new CDCBTC address. 
4. Check the recipient wallet and confirm the CDCBTC holdings.

For more information, check out the CDCBTC FAQs.

Is CDCBTC Safe?

The underlying BTC is held 1:1 via Crypto.com’s in-house multi-party computation custody solution that has undergone SOC 2 Type II assessment by an independent auditor, who validates and audits security controls and processes, with a focus on the following aspects: 

• Security
• Availability
• Processing Integrity
• Confidentiality

Guided by the SOC 2 Type II standards, Crypto.com’s custody solution was designed to ensure that the security controls in place protect the solution itself from security threats like system abuse, theft, fraud, unauthorised removal of data, misuse of software, and improper alteration or disclosure of information.

Conclusion

CDCBTC offers Bitcoin holders a way to unlock DeFi opportunities without compromising on security or the inherent value of BTC. By bridging the gap between Bitcoin’s store of value and smart contract functionality, CDCBTC empowers users to leverage BTC in trading, borrowing, and yield farming across multiple chains. 

While CDCBTC presents exciting potential for enhanced utility, it’s important for users to perform thorough research and consider their risk tolerance before diving in. As always, understanding the features, benefits, and risks associated with any digital asset is key to making informed decisions in the rapidly evolving world of cryptocurrency.

Due Diligence and Do Your Own Research

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.

Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.