Wrapped Bitcoin is a tokenized version of the world’s most popular digital asset in the crypto world, Bitcoin. It was created by BitGo, Kyber Network, and Ren in order to integrate into the thriving decentralised finance (DeFi) ecosystem. Wrapped Bitcoin tracks the original Bitcoin price and allows DeFi users to buy and sell Bitcoin on the Ethereum blockchain. It is backed by the top digital asset in a 1:1 ratio. Wrapped Bitcoin is an ERC-20 token that can be used in DeFi services provided by decentralised exchanges (DeXes), such as crypto lending and borrowing, prediction markets, and other ERC-compliant services.
Transacting on Ethereum with wrapped tokens requires only a small gas (ETH) fee. Wrapped cryptocurrencies are currently available, including a few stablecoins such as Tether (USDT) and Coinbase’s United States Dollar Coin (USDC). Zcash, a private cryptocurrency, also has a wrapped token. Other coins are also releasing wrapped versions in an effort to remain relevant and usable during this period of rapid DeFi adoption. WBTC was launched in January 2019 with the goal of bringing bitcoin liquidity to Ethereum. Users converted more than $800 million in Bitcoin into WBTC in the 18 months following its launch.
Wrapped Bitcoin is an ERC-20 token that represents one bitcoin and can be used in decentralised applications (dApps). Users can use WBTC to deploy bitcoin in the Ethereum ecosystem, which they would not be able to do otherwise. Because there is no need to compute across multiple blockchains, decentralised applications (dApps) can process wrapped token transactions faster than unwrapped versions.
Wrapped tokens act as a link between two distinct blockchain systems. For example, using Bitcoin on the Ethereum blockchain allows Bitcoin’s massive liquidity to flow into the Ethereum network. Wrapped tokens are ideal for DeFi-facing financial transactions because they track the performance of the digital asset they are replicating.
Wrapped Bitcoin can be purchased from a variety of official merchants, including CoinList, Binance, and others. However, the tokenized version of Bitcoin is more widely available on DEX platforms such as UniSwap and SushiSwap. You can use a centralised exchange, which will require you to open an account with them. However, using a DEX like UniSwap will allow you to buy Wrapped Bitcoin without having to go through the KYC process.
Bitcoin is the only cryptocurrency that operates on the first blockchain network and serves as the standard for much of the crypto market. Wrapped Bitcoin, on the other hand, is similar, but it serves a fundamentally different purpose than the original version. It enables DeFi users to use the digital asset to complete a number of critical transactions, effectively dumping Bitcoin into the DeFi pool. Wrapped Bitcoin functions similarly to a stablecoin.
Wrapped tokens have become a big hit with a lot of DeFi users, owing to the liquidity that large-cap cryptocurrencies command. A cryptocurrency with a market cap of more than $1 trillion provides a lot of room for financial services to emerge and allows users to provide much liquidity when compared to a small-cap asset. Another benefit is that it allows more isolated networks, such as Bitcoin, to participate in the evolving blockchain ecosystem. This can be beneficial for investors who have more options when it comes to selecting investment vehicles to work with.
Also Read : -
- Ethereum Explained.
- Tether Explained.
- XRP Explained.
- USD Coin Explained.
- BNB Explained.