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About Wrapped Bitcoin
Key Points
- Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin (BTC) that runs on the Ethereum (ETH) blockchain.
- WBTC is compliant with ERC-20 and is backed by Bitcoin at a 1:1 ratio.
- WBTC was first announced on October 26, 2018, and officially launched on January 31, 2019.
Creation of Wrapped Bitcoin
- WBTC is created by converting BTC into WBTC through a custodian.
- The custodian holds the BTC and mints WBTC tokens, which are then sent to
Unveiling Wrapped Bitcoin: A New Era of Interoperability
Unveiling Wrapped Bitcoin (WBTC): A Bridge Between Bitcoin and Ethereum
Wrapped Bitcoin represents a tokenized iteration of Bitcoin (BTC), seamlessly integrated into the Ethereum (ETH) blockchain ecosystem.
WBTC is fully compliant with the ERC-20 standard, ensuring seamless integration into the Ethereum blockchain’s vast ecosystem, which encompasses decentralized exchanges, crypto lending services, prediction markets, and a wide range of other decentralized finance (DeFi) applications that leverage ERC-20 compatibility.
WBTC is additionally collateralized by Bitcoin on a 1:1 basis, facilitated by a network of meticulously monitored merchants and custodians, thereby ensuring that its value remains perpetually anchored to that of Bitcoin, and enabling users to seamlessly transfer liquidity between the BTC and ETH networks in a decentralized and autonomous fashion.
Wrapped Bitcoin was formally unveiled on October 26, 2018, and officially debuted on January 31, 2019, marking a significant milestone in the cryptocurrency landscape.
The Genesis of Wrapped Bitcoin: A Technical Odyssey
The advent of Wrapped Bitcoin heralds the integration of the world’s premier cryptocurrency, Bitcoin, into the thriving DeFi ecosystem of Ethereum. The WBTC token, conforming to the ERC-20 token standard, enables the creation of tokens for those seeking to convert their BTC holdings into WBTC.
All Bitcoin slated for conversion is securely held by a custodian, who plays a pivotal role in the actual minting and burning of Ethereum-based tokens. When WBTCs are burned, users can reclaim their original BTC balance from the custodian. During the mining process, users send BTC to the custodian for safekeeping and receive an equivalent amount of WBTC tokens in return. Notably, BitGo, the largest custodian for Wrapped Bitcoin, mines a predetermined quantity of WBTC and subsequently sends them to the merchant’s Ethereum address.
When a user opts to swap between wBTC and BTC, they execute a trade – either through a centralized exchange or an atomic swap on a decentralized exchange – to transfer funds to the merchant. Upon completion, the user is at liberty to utilize their BTC/wBTC as they deem fit. Should WBTC be converted to BTC, the corresponding Wrapped Bitcoin balance will be eliminated via a burn transaction.
The WBTC DAO comprises governing members who deliberate on pivotal protocol upgrades and alterations, while also having the capacity to assume the roles of merchants or custodians, overseeing BTC assets.
Unlocking the Potential of WBTC: Endless Possibilities
Wrapped Bitcoin tokens, being ERC-20 compliant, seamlessly integrate with the expansive Ethereum ecosystem. This facilitates their utilization across a wide range of platforms, including decentralized exchanges such as Uniswap, 1Inch, and Sushiswap, as well as exploration of decentralized finance opportunities through WBTC-supported protocols and platforms.
Wrapped Bitcoin (WBTC) presents a plethora of DeFi opportunities, encompassing lending and borrowing, yield farming, token swapping, and liquidity pools. A diverse range of protocols and platforms, including Aave, Balancer, Compound, and MakerDAO, offer support for Wrapped Bitcoin. Furthermore, some of these providers may offer platform-native governance tokens as an additional incentive, fostering a more immersive experience.
Leveraging WBTC as collateral for a crypto-backed loan presents a compelling opportunity for businesses. Furthermore, WBTC holders can generate interest by providing liquidity, albeit at a relatively modest APY.
Alternatively, WBTC can be utilized for margin trading, where it serves as collateral to facilitate trading of Ethereum, stablecoins, and other ERC-20 tokens. By leveraging WBTC, users can bolster fund security while trading, all within a fully non-custodial environment powered by cutting-edge smart contract technology.
The Visionaries Behind Wrapped Bitcoin: Unveiling the Founders
The Wrapped Tokens initiative, of which WBTC is an integral component, is a collaborative endeavour undertaken by three prominent organizations: BitGo, Kyber Network, and Ren, rather than being founded by individual entities.
BitGo, co-founded in 2013 by the esteemed American computer scientist and entrepreneur Mike Belshe, is a pioneering institutional digital asset custody, trading, and financial services firm. Notably, BitGo is not only one of the developers of WBTC but also serves as its inaugural custodian, entrusted with the responsibility of holding WBTC tokens and safeguarding the keys necessary for minting additional tokens.
Kyber Network is a decentralized, on-blockchain liquidity protocol that facilitates seamless integration of diverse cryptocurrency tokens and decentralized finance (DeFi) applications. Founded in 2017 by Loi Luu, Victor Tran, and Yaron Velner, the Singapore-based project has played a pivotal role in the creation of WBTC, alongside Ren, and continues to serve as a key merchant on its network, responsible for minting and burning WBTC tokens to maintain a 1:1 parity with BTC reserves.
Paralleling Kyber, Ren is a pioneering entity dedicated to facilitating seamless cross-blockchain integration of cryptocurrency assets and decentralized finance (DeFi) applications, leveraging innovative solutions like RenBridge and RenVM, among others. Founded in 2017 by visionary entrepreneurs Taiyang Zhang and Loong Wang, Ren has been at the forefront of shaping the future of blockchain interoperability.
The Unparalleled Attributes of Wrapped Bitcoin
As the pioneering and largest cryptocurrency in the market, Bitcoin takes pride in its enormous user base and a substantial liquidity pool worth tens of billions of dollars. Nevertheless, its blockchain functionality, although groundbreaking in its time, appears relatively rudimentary by today’s standards.
In contrast to Bitcoin, Ethereum was deliberately designed from its inception to accommodate more sophisticated use cases, leveraging the innovative technology of smart contracts, thereby giving birth to an entire industry known as “decentralized finance.”
Ethereum and its derivatives provide users with sophisticated financial instruments, including lending and insurance, that operate independently of trusted intermediaries.
By “wrapping” BTC in the ERC-20 standard, WBTC facilitates seamless integration of a Bitcoin-like asset into the sophisticated ecosystem of decentralized financial applications, thereby harnessing the immense liquidity inherent to the BTC market.
Furthermore, Wrapped Bitcoin simplifies the process for exchanges, wallets, and payment services that integrate with Ethereum, as they can support WBTC operations with a single Ethereum node, eliminating the need to maintain separate nodes for ETH and BTC networks.
Ultimately, the Ethereum blockchain’s significantly shorter average block time of approximately 15 seconds, compared to 10 minutes, respectively, substantially accelerates the transaction speed of WBTC, surpassing that of actual bitcoins.
The Circulating Supply of Wrapped Bitcoin [WBTC]: A Closer Look
There is no fixed timetable for the issuance of WBTC. Rather, WBTC is dynamically minted or burned in real-time, contingent upon users buying or selling their tokens for Bitcoin through a decentralized network of merchants and custodians.
Wrapped Bitcoin’s token supply is inextricably linked to the amount of Bitcoin reserves within the WBTC network, with a fixed 1:1 ratio ensuring a direct correlation. As of October 2020, the circulating token count stood at just over 94,000, collectively valued at approximately $1 billion.
The Security Paradigm of the Wrapped Bitcoin Network
WBTC tokens derive their security from the underlying Ethereum blockchain, which, in turn, relies on the robust Ethash proof-of-work function, a variant of the esteemed Keccak family of hash functions.
Where to Acquire Wrapped Bitcoin [WBTC]: A Comprehensive Guide
You can acquire WBTC on a multitude of exchanges, encompassing both centralized and decentralized platforms, which operate as merchants within the Wrapped Bitcoin network. Notable examples include:
- Notable decentralized exchange Uniswap
- Leading cryptocurrency exchange Binance
- Prominent digital asset exchange OKEx
- Renowned cryptocurrency exchange Huobi Global
- Innovative decentralized exchange Kyber Network
The Influx of Wrapped Bitcoin into the Ethereum Network
A significant portion of Bitcoin’s circulating supply has migrated to the Ethereum Network, corporate treasuries, and exchange-traded investment products in the form of wrapped BTC (WBTC) throughout 2021. According to Arcane Research, while the Bitcoin balance on crypto exchanges has decreased by approximately 1.2%, the amount of Bitcoin held in corporate treasuries, exchange-traded investment vehicles, and on Ethereum has increased by 0.51%, 0.69%, and 0.98%, respectively. As of February 2022, there is currently a staggering $10.9 billion worth of WBTC on the Ethereum network. Notably, WBTC is also available on the Tron blockchain, with a total value of $4.1 million worth of Bitcoin.
Associated Resources:
Delve into the world of other Bitcoin-pegged tokens on the Ethereum network, including renBTC and HBTC, and discover their unique characteristics.
Delve into our in-depth exploration of how Ren is revolutionizing decentralized finance by bridging the gap between Bitcoin and DeFi.
CMC Alexandria provides a comprehensive introduction to Wrapped Bitcoin, which can be accessed here.