Wrapped Bitcoin (WBTC) – a platform that issues WBTC (ERC-20) tokens, such that the expenditure is 1:1 saved by the value of Bitcoin. WBTC is actively used to work with various DeFi Protocols for example, Kyber Network, Ren, Compound, Dharma and dozens of others.
Thus, users transfer Bitcoin liquidity to the Ethereum blockchain and significantly expand the range of interaction with the main cryptocurrency. Since there are not so many decentralized protocols for Bitcoin, this solution seems ideal. Experts from our website we analyze how the Wrapped Bitcoin platform works, how WBTC tokens are issued and used.
Briefly about the main thing
- Wrapped Bitcoin (WBTC) is a cryptocurrency that is a token ERC-20 on the Ethereum blockchain, backed by bitcoins.
- WBTC was created to integrate Bitcoin into the world of decentralized finance (DeFi) on Ethereum. Launched in January 2019 by BitGo, Kyber Network and Ren.
- Each WBTC token is backed by 1 BTC, which is held by an independent custodian.
- WBTC provides the ability to use Bitcoin in Ethereum smart contracts.
- WBTC turnover and liquidity are regulated through a system of partners and custodians responsible for the minting and burning mechanisms of tokens.
- The process of exchanging Bitcoin for WBTC and vice versa is completely transparent and can be tracked through blockchain explorers.
- WBTC is one of the most popular wrapped tokens, along with others like Wrapped Ether (WETH).
- While WBTC offers the benefits of Bitcoin integration, it also presents concentration and security risks.
- WBTC is used to store wallets with support for ERC-20 tokens, for example Ledger, Trust wallet, Metamask.
Wrapped Bitcoin (WBTC) Chart and Rate
WBTC/BTC Rate Chart at Binance cryptocurrency exchange:
general information
| Designation | Wrapped Bitcoin (WBTC) |
|---|---|
| Clock | WBTC |
| Standard token | ERC-20 |
| Blockchain | Ethereum |
| Current edition as of 10/11/20 | 95 766 BTC |
| Price for 10/11/20 | 11.363$ |
| Market capitalization on 10/11/20 | 1.088.076.339$ |
| Official website | https://wbtc.network/ |
| White paper | https://wbtc.network/assets/wrapped-tokens-whitepaper.pdf |
| https://twitter.com/WrappedBTC | |
| Exchanges | Binance, Uniswap OKEx, HTX Global, etc. |
How Wrapped Bitcoin Works
The Wrapped Bitcoin ecosystem includes four main categories of actors:
- Custodians/custodians. Organizations that hold assets that support w-tokens. Specifically, the bitcoins that support WBTC are held by BitGo.
- Traders. Responsible for regulating w-tokens – their release and burning.
- Users. Anyone who performs any transaction with WBTC and other w-tokens on the Ethereum network.
- WBTC DAO participants. Responsible for protocol changes, adding or removing custodians, and monitoring conditions for merchants and users.
The origin of the process is as follows. Users who hold BTC and wish to convert it to WBTC interact with traders. They initiate the process of minting (issuing) or burning tokens, based on user verification. Custodians (specifically BitGo) hold actual BTC and mint WBTC on the Ethereum blockchain. If WBTC is burned, the BTC is returned from the custodian to the user.
Many popular DeFi applications on Ethereum require the use of collateral — locking up some crypto assets to lend out other crypto assets. However, this network imposes some limitations. With Bitcoin staking, protocols gain better liquidity and thus can form more sources of collateral for decentralized applications. Wrapped Bitcoin also allows BTC holders to use the asset to earn supplemental income on protocols like Compound, without losing the value of their investment.
Who the project was developed for:
- Organizations. Exchange, wallets and payment services can now process different transaction formats seamlessly. WBTC combines the benefits of Ethereum and Bitcoin while simplifying token processing using exclusively Ethereum nodes.
- Traders. Decentralized exchanges are usually limited to ERC-20 tokens and therefore suffer from low liquidity and insufficient trading volumes. Thanks to WBTC, users can significantly increase the flexibility of fund management. The Ethereum network processes transactions faster than the Bitcoin network, so moving assets between exchanges is faster.
- Decentralized applications. Bitcoin payments can now be used in credit and exchange protocols, prediction markets, etc.
Compared to real BTC, Wrapped BTC does not have the same advantages and reliability, so the behavior of people and organizations plays a key role in managing the system. To increase the level of trust and transparency, the project is regularly audited and publishes all transactions and internal verifications. Users can independently check how many bitcoins were sent to the WBTC address on the Bitcoin network and then make sure that this data corresponds to the WBTC tokens on the Ethereum blockchain. Likewise, you can monitor the WBTC burning process when exchanging them for Bitcoin.
The WBTC DAO governors make decisions about significant updates and adjustments to the protocol, as well as who will play the role of vendors and custodians that manage the system.
WBTC {receiving} process
Mining WBTC tokens for Bitcoin is not difficult. The user interacts with the seller and receives exactly the amount of WBTC he gave in BTC. The tokens are transferred to the user after verification.
In the opposite direction, the user can give WBTC to a BTC exchange, creating a redemption request. The WBTC is burned and a similar amount of Bitcoin is transferred to the user.
Operations are carried out directly with the participation of partners: https://wbtc.network/dashboard/partnersfor example, CoinList.
Advantages and disadvantages
Where to store WBTC
WBTC is an ERC-20 token and can be stored in wallets that support this type of asset. The browser wallet works very well Metamask. Install it on your Chrome browser, create an account and save your recovery phrase.
So, since the wallet only works with Ethereum by default, click on “Add Token” and manually search for WBTC. You can now send and receive this token using Metamask.
Where to Buy, Sell and Trade WBTC
The token is traded on several decentralized exchanges, much like Binance, OK, Currency.com, Bybit, cooperative, MEX, EXMO, Phemex, BingX.
So, to buy it using the Binance exchange, you will need:
- Create an account on the trading platform and secure it with two-factor authentication.
- Make sure your balance contains one of the currencies that Wrapped BTC is traded in (currently ETH or BTC).
- Go to your spot wallet, find WBTC and click “Trade” and select your desired trading pair (WBTC/ETH, WBTC/BTC).
- Go to the trading terminal and create a buy order.
Exchanges that support WBTC:
Frequently asked questions
Conclusion
Wrapped Bitcoin allows Bitcoin holders to join the DeFi community. This clearly helps the development of the decentralized finance ecosystem significantly. Users can enjoy the greater freedom and lower transaction fees of the Ethereum blockchain, as well as gain access to a growing number of financial applications.