What is wBTC? The Purpose of Wrapped Bitcoin

Many new friends will always wonder what wBTC is? Is it a new coin or is it related to Bitcoin (BTC). This article will shed some light on these issues for you.

What is wBTC?

WBTC stands for Wrapped Bitcoin and simply an ERC20 token representing Bitcoin. 1 WBTC = 1 BTC. BTC can be converted to WBTC and vice versa.
Being an ERC20 token makes WBTC faster than regular Bitcoin, but the main purpose of WBTC is to make it possible to participate in the DeFi space of Ethereum: wallets, dapps, smart contracts.

Find out what is ERC20? Learn more about ERC20 tokens and ERC20 wallets

The current amount of Bitcoin locked in DeFi is 171.33k BTC (about $2.23 billion).

BItcoin Locked in Defi – According to Intotheblock

Who created wBTC?

Wrapped BTC launched on Ethereum Network on January 1, 2019.
Wrapped Bitcoin was created as a collaborative project between the major players in the DeFi ecosystem: BitGo, Ren, Dharma, Kyber, Compound, MakerDAO and Set Protocol in an effort to bring more liquidity to the Ethereum Network.
The project is currently controlled by a Decentralized Autonomous Organization (DAO) known as the WBTC DAO.

In addition to wBTC, imToken has also brought Bitcoin to the ERC20 network. The token is called imBTC. There is also a large amount of BTC locked in this protocol.

Why encode BTC into ERC20?

As you all know, the DeFi space, mainly Lending & Borrowing protocols, occupies the majority. When you want to borrow USDT in Compound protocol, you have to collateralize Coins. But ETH or ERC20 tokens account for a very small amount of capitalization.

ETH accounts for only $46 billion, about 1/6 of Bitcoin. The other tokens are insignificant. That’s why the idea of ​​Locking BTC in ERC20 for ease of transactions was established.

All Locked process, the amount of BTC locked in ERC20 to convert to wBTC. Or wBTC converting back to BTC is checked on-chain. Ensure transparency.

How is wBTC token generated?

When you have BTC, if you want to change it to wBTC, you have to find Merchants (sellers). You deposit BTC to them, they will lock it and print out wBTC for you.

The same goes for converting wBTC to BTC. You return wBTC to Merchants, they will burn this wBTC and return the locked BTC to you.

All of the above processes have Smart Contract monitoring and cannot be tampered with.

What can you do with wBTC?

  • Buy, sell, exchange on ERC20 platform of exchanges such as: Uniswap, Kyber Network, …
  • Mortgage to borrow USDT, DAI, USDC,… on Compound protocol

Discuss more about wBTC at:

Group Telegram: https://t.me/GTAmargin
Channel GTA: https://t.me/GTAmarginchannel
Channel News: https://t.me/goctienao
Fanpage: https://fb.com/groups/tradecryptovietnam

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