What is the difference between BTC and wBTC when you borrow against it?

By Jamie Cooke · Published 26 October 2026 · Updated 26 October 2026

When you borrow on Diamond Hands by GVNR, your BTC stays native on Bitcoin L1, locked as collateral in its own isolated vault, with no wrapping or bridging. wBTC is an ERC-20 token on Ethereum backed by BTC that a custodian holds, so borrowing against wBTC adds custodian, contract and redemption layers on top of the loan itself.

Key facts

What is wBTC, and who holds the BTC?

wBTC (Wrapped Bitcoin) is an ERC-20 token on Ethereum backed 1:1 by BTC (WBTC whitepaper; WBTC docs). ERC-20 is the standard token format that Ethereum apps use. The BTC itself sits with a custodian. The wBTC docs describe the custodian as "the only entity authorized to mint and release WBTC" (WBTC docs).

You don't deal with the custodian directly. Approved merchants sit in between and run KYC and AML checks. To mint, the BTC goes to the custodian, which waits for six Bitcoin confirmations and then mints the same amount of wBTC. To redeem, a merchant burns the wBTC, the custodian waits for 25 Ethereum confirmations, and then it releases BTC to the merchant (WBTC docs).

What changed with wBTC custody in 2024?

On 9 August 2024, BitGo announced it would move its wBTC business into a joint venture with BiT Global, which it described as a partnership with Justin Sun and the Tron ecosystem. Custody would spread across the United States, Hong Kong and Singapore (BitGo). Cointelegraph reported the shift as complete on 9 October 2024, with a two-signature multisig, and said the move "sparked concerns from some users" (Cointelegraph).

Lenders and exchanges reacted. A Maker executive proposal dated 12 August 2024 set the debt ceiling of its wBTC vaults to 0, to prevent further borrowing without liquidating existing positions. CoinDesk reported on 15 August 2024 that the motion had passed (Maker governance). On 19 November 2024, Coinbase said it would suspend wBTC trading on 19 December 2024 (The Block). In a court filing reported by CoinDesk on 17 December 2024, Coinbase said Mr Sun's links to wBTC presented "an unacceptable risk to its customers and the integrity of its exchange" (CoinDesk). BitGo's CEO, Mike Belshe, said in August 2024: "There is no single party that has the ability to mint or steal from the underlying treasury" (CoinDesk).

What extra risks come with borrowing against wBTC?

BTC price risk applies to any Bitcoin-backed loan. wBTC adds layers on top:

In November 2022, during the FTX and Alameda fallout, wBTC traded at a discount of up to about 1.5% to BTC (CoinDesk, citing Kaiko, 28 Nov 2022).

On a small loan, these layers may matter little. On a large one, each layer is one more thing that has to keep working for you to get your BTC back.

What are the benefits of borrowing against native BTC on Diamond Hands?

On Diamond Hands, the collateral is native BTC itself, so none of the wrapper layers above apply. Diamond Hands is self-custodial. Your BTC stays native on Bitcoin L1, locked as collateral in its own isolated vault. No bridging, no wrapping. BTC collateral is never pooled or rehypothecated.

You receive UCD. UCD is a Bitcoin-backed stablecoin. It is what you receive when you borrow on Diamond Hands, and you can swap it into USDC or USDT. Not to be confused with USDC: UCD and USDC are different tokens.

The cost is a one-off 3% fee on the amount borrowed, added to the loan balance when you mint UCD. Borrow 100 UCD and you repay 103 UCD. The fee covers one 12-month term, and extending for a further 12 months costs 3% of the outstanding debt at each annual renewal. There is no early-repayment penalty. Once the UCD is repaid, your BTC is withdrawable after 6 Bitcoin block confirmations. The maximum LTV at opening is 66%. You choose how much to borrow up to that limit, based on your own risk appetite.

Diamond Hands still carries risk. The loan can be liquidated if the BTC price falls far enough, and the product is in Mainnet Beta, with a 100 UCD cap.

Frequently asked questions

Is wBTC the same as BTC? No. wBTC is an ERC-20 token on Ethereum backed by BTC that a custodian holds. Its market price can drift from BTC's.

Do I need to wrap my BTC to borrow on Diamond Hands? No. Your BTC stays native on Bitcoin L1, locked as collateral in its own isolated vault. No bridging, no wrapping.

Is my BTC pooled with other borrowers on Diamond Hands? No. Each Diamond Hands loan has its own isolated vault, and BTC collateral is never pooled or rehypothecated.

How much does it cost to borrow on Diamond Hands? A one-off 3% fee on the amount borrowed, for a 12-month term. Borrow 100 UCD and you repay 103 UCD. Extending for a further 12 months costs 3% of the outstanding debt at each annual renewal.

Sources

All checked 21 Oct 2026.

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About the author

Jamie Cooke, Partnerships and Outreach, GVNR. LinkedIn

Jamie Cooke leads Partnerships and Outreach at GVNR, the team behind Diamond Hands. He has been active in DeFi since 2020. He spent his first couple of years learning how on-chain lending, stablecoins and Bitcoin infrastructure actually work, before joining GVNR to build its partnerships and community. He writes about Bitcoin-backed borrowing in plain terms, so people can understand how it works and how to keep control of their BTC.

Diamond Hands is a decentralised protocol. Borrowing involves risk, including liquidation of collateral. Carry projections are illustrative model outputs, not return guarantees. Nothing on this site constitutes financial advice.