There is a sentence in most DeFi lending guides that quietly does a lot of damage: "borrow against your Bitcoin."
On every chain except one, you do not borrow against your Bitcoin. You borrow against a token that represents Bitcoin held somewhere else, by someone else. Which token, and which someone, is a decision you make before you have compared a single rate, and it introduces a way to lose money that has no equivalent in a custodial loan.
Why wrapping exists
Bitcoin's network does not run the smart contracts that make on-chain lending work. A lending protocol on Ethereum cannot hold your BTC, because BTC does not exist on Ethereum. So the market built representations: deposit real Bitcoin with an issuer, receive a token on the destination chain, use that token as collateral.
Every one of those arrangements answers the same three questions differently. Who holds the real Bitcoin? How do you get it back? What happens if they fail?
The wrappers actually in use
Issued by Coinbase, redeemable one-to-one with Coinbase for real Bitcoin. Your wrapper risk is Coinbase custody risk.
The original wrapped Bitcoin. Backed by a custodial reserve with a merchant and custodian network behind it.
A multi-chain Bitcoin representation issued by Solv, with reserves across several venues.
Lombard staked Bitcoin. Carries its own staking and validator assumptions on top of the wrapper.
A Bitcoin layer asset on Stacks, redeemable for Bitcoin through a decentralised signer set rather than a single company.
Avalanche bridged Bitcoin, issued through the Avalanche Bridge.
A threshold-signature Bitcoin representation, minted through a decentralised signer group rather than one custodian.
BNB Chain pegged Bitcoin, issued and custodied by Binance.
Lender facts on this page render live from our comparison database, last verified August 4, 2026. Figures refresh weekly; for the current set and your own loan size, see the comparison tool.
Two families, and the distinction is the whole article.
Custodial wrappers (cbBTC, wBTC, BTC.b, BTCB) are issued by a company that holds the real Bitcoin. Redemption is a claim against that company. The risk is concentrated, identifiable, and in Coinbase's case attached to a large regulated public business you can actually assess.
Decentralised representations (sBTC, tBTC) are minted through a signer set or threshold-signature group rather than one custodian. No single company's failure ends the peg. In exchange you take on newer mechanisms, smaller track records, and assumptions about how those signers behave under stress.
Neither family is simply safer. They concentrate risk in different places.
The failure mode that has no CeFi equivalent
This is the part worth reading twice.
A lending protocol values your collateral using an oracle price for the wrapper, not for Bitcoin. If the market starts doubting the issuer, the wrapper trades below Bitcoin. Your collateral is marked down. Your loan-to-value rises. You become eligible for liquidation.
Bitcoin does not have to move at all for this to happen.
And because on-chain liquidation is automatic with no cure period, as covered in what happens in a DeFi liquidation, there is no window in which a human decides the depeg is temporary. The contract acts on the number the oracle gives it.
A custodial borrower does not have this exposure. Their collateral is Bitcoin, valued as Bitcoin.
What to check before you pledge
Who is the issuer, by name? If the answer is a company, that company is now a counterparty. If it is a protocol, the signer set and its incentives are the counterparty.
How is redemption actually performed, and by whom? A wrapper is only worth Bitcoin if someone will exchange it for Bitcoin. Check whether that is open to you directly or only to whitelisted merchants.
Is there published reserve attestation? Custodial wrappers should be provable. This is the same discipline we apply to lenders in which lenders publish proof of reserves.
Does the protocol's oracle price the wrapper or Bitcoin? If it prices the wrapper, depeg risk is live. Most do.
How deep is the market in that specific wrapper? A thin wrapper depegs more easily and recovers more slowly.
The chain and the wrapper are one decision
You cannot choose these independently. Borrow on Base and you are almost certainly using cbBTC. Borrow on Stacks and you are using sBTC. The chain determines the menu, which is why the wrapper question belongs alongside the network question rather than after it. That comparison is in Stacks vs Ethereum vs Solana.
The Coinbase loan is the clearest illustration. It looks like borrowing from Coinbase. Under the hood your BTC becomes cbBTC and is supplied to a Morpho market on Base, as explained in what is the Coinbase Morpho loan. Familiar interface, on-chain mechanics, wrapper included.
Or avoid the question entirely
Every custodial lender we track holds real Bitcoin. No wrapper, no issuer, no depeg vector. Arch places it with Anchorage Digital, APX with BitGo Trust, Ledn across several qualified custodians, and Unchained in a multisig where you hold a key.
That is not free. The gap between custodial and on-chain rates has averaged around six percentage points across our index history, quantified in the custody premium. Removing wrapper risk is part of what that premium buys, and whether it is worth it depends on how much the extra issuer between you and your Bitcoin bothers you.
Where to compare
Every on-chain market, with its wrapper and network shown, is on DeFi Bitcoin loans and the protocol index. For the custodial side, the comparison tool and lender reviews. The tax treatment of wrapping specifically is covered in is wrapping Bitcoin to cbBTC taxable.
This is not financial advice
borrow/on/bitcoin is a comparison publisher, not a lender, broker, or financial advisor. Wrapper mechanics, issuers, reserve arrangements and redemption terms change without notice, and nothing here endorses any wrapper, protocol, or lender. Wrapped assets carry issuer, bridge, and smart-contract risk in addition to the price risk of Bitcoin itself, and a depeg can trigger liquidation of your position even when Bitcoin has not fallen.