Wrapped BTC, or WBTC (or Wrapped Bitcoin), is the tokenized Bitcoin version. It’s hosted on the Ethereum blockchain and tied to the value the original coin in a 1:1 relationship. WBTC, the compatible Bitcoin version with ERC-20 standards allows you to trade BTC to other ERC-20 tokens and without having to recurring to any third parties.
The popularity of WBTC in Ethereum’s DeFi ecosystem has grown due to its use cases in decentralized finance (DeFi) protocols, including staking, investing, NFTs trading, yield farming, margin trading, providing liquidity to liquidity pools, and crypto lending.
Learn everything you need about WBTC. In just a few steps, learn how to purchase Wrapped Bitcoin WBTC.
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Wrapped Bitcoin
WBTC, or Wrapped Bitcoin, is the tokenized Bitcoin version on Ethereum.. A wrapped coin is a prototype token pegged to the original coin’s value that can be unwrapped at any point. Nearly every major blockchain offers a wrap version of their native cryptocurrency. For example, Wrapped Ether is WETH, which has the exact same value as Ether. Smart contracts can reproduce the real-time price of Bitcoin for Wrapped Bitcoin. It is possible to trade Wrapped Bitcoin for Bitcoin at 1:1 ratio. You can redeem all wrapped coins (e.g. WETH) for original assets at any moment.
In order to encourage interoperability across different networks, crypto assets, and blockchains, wrap coins were developed. Wrapped Bitcoin (WBTC), for example, was created to improve interoperability among blockchains and allow Bitcoin (BTC), to be used in decentralized apps (DApps)..Bitcoin can’t be traded directly alongside Ethereum-based tokens, as it was made long before ERC-20 was established. It is therefore impossible to trade Bitcoin on an exchange decentralized or lend BTC through a platform decentralized for lending. WBTC is designed to overcome these problems by making it possible to exchange Bitcoin with other Ethereum-based tokens, and conforming to the ERC-20 standard.
Bitcoin needs to be saved as a reserve in order to issue WBTC tokens. Wrapped BTC is a protocol that allows Bitcoin holders the ability to swap their Bitcoin tokens with equal numbers of WBTC tokens. They can then be used on the Ethereum blockchain. Wrapped BTC has a greater range of uses than BTC. It is especially popular in Decentralized Finance (DeFi), which allows for a wide variety of other applications.
WBTC token facilitates faster Bitcoin transactions. It also brings more liquidity to Ethereum’s ecosystem. This includes decentralized exchanges (DEXs), financial apps, and other cryptocurrency-related services. While the majority of trading volume takes place on centralized exchanges with Bitcoin, WBTC brings Bitcoin’s liquidity to DEXs and makes it possible to use Bitcoin for token trades.
Wrapped Bitcoin BTC, which was officially introduced in January 2019, was announced in October 2018. It was designed by Kyber Network (BitGo), Ren and others, all of whom maintain their respective positions within the protocol.
WBTC Decentralized Autonomous Organization (WBTC DOA) is a group of more than 30 people that manages the network. They also vote on eliminating merchants or adding custodians.
What Wrapped Bitcoin Does
Wrapped Bitcoin is a standardization of Bitcoin according to ERC20, providing users with access to a number decentralized exchanges, wallets, DApps, and other services. It brings Bitcoin’s liquidity to DEXs and makes it possible to use Bitcoin directly in ETH-based smart contracts. WBTC allows faster verification of Bitcoin transactions by using Ethereum’s blockchain.
A request must be made with the custodian before a WBTC new is produced or minted. WBTC white paper specifies that the merchant sends Bitcoin to the custodian, who then mints WBTC and sends it to the merchant’s wallet on the Ethereum blockchain. When the user asks the custodian for the release of the token from its reserves, wrapped Bitcoin can be turned back into Bitcoin. Simply put, every WBTC exists is equal to a Bitcoin held by a custodian.
End-users need to be aware that merchants have to adhere with ALM and KYC standards. They are like vaults, providing security and reliability for WBTC tokens. They are responsible for minting BTC and sending the equivalent WBTC to the merchant (one to one, based on the BTC value)
BitGo, the sole custodian WBTC since October 2021 is it. More than 1% Bitcoin was stored in wrapped Bitcoin WBTC tokens as of June 2021.
WBTC is withdrawn from circulation by end-users. They then convert WBTC back into Bitcoin through a burning process that’s carried out in the presence of a merchant. The custodian then allows the merchant to release the bitcoins, which he then reimburses the customer.
There are many key players involved in creating and managing the WBTC protocol.
- Custodians are responsible for ensuring that WBTC tokens can be fully backed. BitGo is Bitcoin’s custodian.
- Merchants play an important role in the distribution of WBTC through burning and mining WBTC.
- Users: WBTC can be used by users to transact, transfer and buy ERC-20 tokens in the Ethereum blockchain.
- WBTC DAO: It’s the governing body responsible for removing or adding merchants and custodians. It’s also responsible for contract changes. It helps to centralize the network by using multisig contracts. This requires all members must reach unanimity before a new contract is initiated.
Current WBTC balance on Ethereum is $10.9B as of February 2022.
Wrapped Bitcoin
As an investor, there are many reasons to wrap your Bitcoin. WBTC, which replaces the original Bitcoin, allows you to transact with the DeFi network or any decentralized application, smart contract, game, and DEXs. DeFi lending and borrowing networks are also available to wrapped Bitcoin owners.
Let’s look into some of the benefits of buying Wrapped Bitcoin.
Liquidity
WBTC’s market advantage is greater liquidity. Because the Ethereum ecosystem is spread out and diverse, the funds’ distribution can create a scenario where decentralized exchanges and other platforms lack the necessary liquidity to function optimally. Low liquidity makes an exchange less effective because users can’t trade their tokens quickly for the desired amounts. WBTC seamlessly integrates BTC liquidity in the flexibility of Ethereum’s ecosystem. WBTC thus closes the liquidity circle between multiple DeFi/CeFi products.
Functionalities
WBTC offers more functions than Bitcoin. WBTC, for instance, can use Ethereum smart contracts which are a key technology in the blockchain sector. However, smart contracts didn’t become mainstream until Ethereum was launched years after Bitcoin. This is why Bitcoin does not have all the smart contract capabilities.
Scalability
Wrapped Bitcoin WBTC also offers scaleability. WBTC transactions run faster, and are cheaper because Wrapped Bitcoin tokens can only be purchased on Ethereum blockchain. Additionally, you have more transaction and storage options.
WBTC Staking
Staking, a DeFi function that is very popular, has many versions. Crypto investors must stake their crypto to a smart contract. In return for rewards, they will need to lock it into the smart contract. This next-gen protocol can be utilized by those who convert BTCs to WBTCs. Some platforms let you earn automatic rewards by staking WBTC on Ethereum networks.
WBTC Model that is trustworthy
Trustless is one way to wrap Bitcoin in a more sophisticated manner using a decentralized network. Keep Network allows investors to wrap Bitcoin through TBTC. This scenario transfers the responsibility for the centralized custodian to smart contracts. Your Bitcoin remains locked in a contract that the platform can’t adjust without your approval. Investors are provided with an independent and trustworthy system through this strategy.
Where can I buy wrapped Bitcoin
WBTC is available on numerous cryptocurrency exchanges.
Keep it up
The innovative Uphold trading platform, which is a US-based exchange, supports multiple cryptocurrencies including WBTC. The platform stands out for its simplicity, unique features, and company’s credibility. Uphold offers a mobile and desktop app as well as a simple to use web interface. You can customize the trading view with all your traded assets. It is easy to navigate and modern on mobile and desktop.
It is prohibited for residents from Europe or the United Kingdom to use this platform.
Binance
Binance is the largest cryptocurrency exchange in terms of trading volume. You can trade crypto-tocrypto in over 500 virtual tokens and cryptocurrencies. While trading is limited in the US it provides low trading fees, and offers a large selection of currencies around the world. You can instantly purchase Bitcoins, 15 of the most popular cryptocurrencies, using fiat currencies, credit cards and bank accounts. Users can trade crypto derivatives with leveraged positions—(up to 20x leverage on futures and 10x on margin trading)—for maximum returns. Binance supports crypto loans and staking. Binance’s NFT marketplace and trading platform is the premier destination for NFTs and digital collectibles across mediums, from visual arts and gaming to music and sports. WBTC trading on Binance has many advantages, including lower fees and greater liquidity. You can also quickly purchase or sell WBTC in order to profit from market-moving announcements.
The exchange can be used by investors coming from Australia and Canada as well as Singapore and the United Kingdom. Residents of the United States are not permitted to purchase most tokens.
KuCoin
KuCoin is one the most well-known and largest cryptocurrency exchanges. Over 300 crypto currencies are supported by the exchange, including Wrapped Bitcoin. The exchange offers high-level security and an easy-to-use interface. It also has a beginner-friendly user interface. There are many crypto services available: instant-exchange, margin trading and futures trading. You can borrow or stake digital assets via the Pool-X. IEO launchpad to crypto crowdfunding. Non-custodial trading. KuCoin has the lowest exchange trading fees.
HuobiGlobal
HuobiGlobal was founded in 2013 and has since grown to become one of the world’s largest cryptocurrency exchanges, with a total trading volume of US $1 trillion. Huobi has more than 5,000,000 users across 130 countries and accounts for 50% of global digital asset transactions. HuobiGlobal supports WBTC trading. Currently, the exchange doesn’t welcome the United States or Canadian residents.
Coinbase
Coinbase, the United States’ largest cryptocurrency exchange, supports over 100 cryptocurrencies including Wrapped Bitcoin WBTC. Coinbase is accessible on iOS, Android and desktop. However, Coinbase’s fees can be confusing and more expensive than its competitors.
This exchange allows residents of the United States to trade, with the exception of Hawaii.
Wrapped Bitcoin: How do I Buy It?
You’ll have to compare cryptocurrency exchanges to choose the one that supports WBTC and has the features you want, such as low transaction fees, an easy-to-use platform, and 24-hour customer support. Consider whether the exchange supports Wrapped Bitcoin purchases with any of your preferred payment options, including a credit card or debit card, other cryptocurrency or bank transfer. Coinbase Pro, eToro, and eToro support Wrapped Bitcoin.
Here’s our simple step-by-step guide to help you purchase WBTC right away!
Step 1: Open an account
After you’ve decided on a reliable exchange, the next step is to open a trading account to buy Wrapped Bitcoin. Different platforms have different requirements. Personal information such as your name, contact number, email address, home address, social security number, and a copy of your driver’s license, passport, or government-issued ID will be required in most transactions. If you intend to withdraw fiat currency from your bank to buy the WBTC token, this information must be provided.
It’s advisable to enable two-factor authentication (2FA) to keep your funds safe once you’ve verified your identity.
By sending your tokens to a decentralized exchange, you can swap your ETH and BTC tokens for WBTC.
Step 2: Deposit the funds
You will need to verify your account and deposit money in order to purchase WBTC. Your location and preference will determine which payment method you choose. The majority of exchanges allow you to deposit using these three methods.
- Debit/Credit Card: A link between your card and your crypto account allows for instant, or recurring purchases. But beware that there is an additional charge.
- Bank Accounts: Most local bank transfers are free. However, you should double-check the information with any exchange.
- WBTC is a cryptocurrency that can be exchanged for other currencies like Ethereum and BTC.
Step 3: Get a Wallet
To store your crypto coins safely, you will need a wallet that has your personal set of keys. Based on your investment preferences, it is possible to choose between hardware and software wallets. However, the former are more secure.
The advantage of software wallets lies in their flexibility and ease of use; however, these wallets are vulnerable to security leaks because they’re hosted online. The CoinStats software wallet is a great option.
Because they provide offline storage and significantly reduce the risk of hacking, hardware wallets are often considered to be the best way to keep your cryptocurrency safe.
You can swap ERC-20 tokens between several Ethereum wallets via their interface.
Step 4: Purchase WBTC
All you need to do is buy Wrapped bitcoin WBTC. If the exchange allows instant buying, this is the best way to purchase WBTC. WBTC can also be bought instantly with market orders on some central exchanges.
Final Thoughts
Wrapped bitcoin is becoming a more prominent addition to the cryptocurrency market. WBTC has the same currency as Bitcoin and allows for Bitcoin to be transacted within any decentralized Ethereum application or the DeFi network. BTC holders may lend Bitcoin via smart contracts. This involves connecting their wallets and receiving a fixed annual interest rate.
In just over one year, about $800 million worth of Bitcoin was converted into WBTC, and 1% of Bitcoin’s circulating supply of 18.73 million is now used in DeFi through Wrapped Bitcoin tokens.
For both decentralized and centralized exchanges, wrapped tokens improve liquidity and capital efficiency. Also, they enable quick and affordable transactions which is especially useful for slower blockchains like Ethereum or Bitcoin.
The current Wrapped Bitcoin price and many other metrics can be found on CoinStats. This is one of the most popular crypto platforms. Visit our CoinStats blog for more information about wallets, crypto exchanges, portfolio trackers and tokens. You also have the opportunity to read our buying guides that explain how to buy different cryptocurrencies like How to Buy Bitcoin or DeFi.
Disclaimer about investment adviceInformation on this site is for informational purposes only. CoinStats does not endorse any recommendation to sell, buy or hold securities or financial products or instruments. This information does NOT constitute financial advice or investment advice.
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