Stress Test for WBTC: If you want to use bitcoin as collateral in decentralized finance, wrapped bitcoin (WBTC) is the tool of choice. It transforms bitcoin into a token readily useable in the Ethereum ecosystem that dominates DeFi, capturing 84% of all bitcoin derivatives used for this purpose. There are 217k bitcoins locked in WBTC, roughly 1% of the total supply of bitcoin. WBTC was rising in AUM even after the initial market downturn but recently jumped to a discount of more than 150 basis points. Curious minds want to know about the impact of de-pegging from bitcoin. WBTC is minted and burned through a mechanism defined by its DAO. Concerns arose as Alameda Research was the largest intermediary in the DAO to mint WBTC, more than double the next intermediary. But there is no counterparty risk. Minting is done by sending bitcoin to the custodian deposit address at BitGo, then submitting a minting request. The custodian's approval is then recorded on-chain. Likewise, a request to burn WBTC is done by submitting an on-chain address and can be done through any intermediary approved by the DAO, not just the one who minted WBTC. The intermediary just collects a toll for the service, no more or no less. So, there’s no risk? Not quite. There’s one custodian – BitGo, through its regulated Trust. Custodial security is high, with multiple digital signatures required to approve a transaction. Assets are verifiable on-chain. The risk is chiefly in the latency of burning WBTC to get your BTC back, and that could cause a WBTC liquidity discount. That latency could be technical, regulatory, or otherwise. The most effective tests require stress. Resilience emerges on the other side.