Wrapped Bitcoin (WBTC) is a tokenized form of Bitcoin (BTC) that operates on the Ethereum blockchain. This allows users to trade and use Bitcoin on Ethereum-based decentralized exchanges (DEXs) and decentralized applications (DApps).
WBTC was created BitGo, a cryptocurrency custodial service. The token is pegged to BTC in a 1:1 ratio, meaning that one WBTC is always worth one BTC. This is achieved through a process called 'wrapping,'' which involves locking up BTC in a smart contract on the Bitcoin blockchain and issuing a corresponding amount of WBTC on the Ethereum blockchain.
The project offers several advantages over BTC. First, it is ERC-20 compatible, which means that it can be easily traded and used on Ethereum-based DEXs and DApps. Second, Its more liquid than BTC, as there is more trading volume for WBTC on Ethereum-based exchanges. Third, Its more censorship-resistant than BTC, as it can be transferred between Ethereum addresses without the need for intermediaries.
However, WBTC also has some disadvantages. First, it is a centralized token, as it is issued and managed by BitGo. This means that users are trusting BitGo to maintain the peg between WBTC and BTC. Second, WBTC is not as secure as BTC, as it is exposed to the risks of the Ethereum blockchain.
Here are some of the key features of WBTC:
Here are some of the risks of using WBTC:
Overall, WBTC is a useful tool for users who want to trade and use Bitcoin on Ethereum-based DEXs and DApps. However, users should be aware of the risks involved in using WBTC, such as the risk of losing funds if the peg between WBTC and BTC breaks.