What Is Wrapped Bitcoin (WBTC)? How It Works & Where To Buy It?

Wrapped Bitcoin (WBTC) is the tokenized version of Bitcoin. It has a 1:1 ratio with Bitcoin and is an ERC-20 token that represents Bitcoin.

It has fast emerged as the most popular and most utilized tokenized Bitcoin asset on the market. WBTC has rapidly grown to reach a market cap of $12,460,000,000 (16th largest market cap).

 

How Wrapped Bitcoin (WBTC) Works

The initial founders of Wrapped BTC were BitGo, Ren, and Kyber. After its creation, it was mainly available on decentralized exchanges such as Uniswap.

You may be wondering why people would want to buy Wrapped BTC if they could buy Bitcoin?

Simply put, the bitcoin blockchain allows for compatibility of only Bitcoin and bitcoin-forked projects. Using a tokenized ERC-20 (Ethereum blockchain) version of Bitcoin is pegged to the price of BTC; it can be easily used in decentralized finance (DeFi).

Bitcoin holders can tap into the yield revenues and staking rewards available on the Ethereum ecosystem with WBTC tokens. This creates additional utility and versatility for the asset.

So, how does it work?

The process of converting BTC to WBTC involves custodians, merchants, and a WBTC DAO (Decentralized Autonomous Organization).

In a nutshell, users who intend on obtaining WBTC tokens first need to deposit BTC – then merchants initiate a transaction to notify custodians to mint WBTC.

Merchants then need to send the Bitcoin to the custodian in exchange for the freshly minted WBTC – the minting is regulated and facilitated by smart contracts run by DAO’s. After the process is complete, users receive their WBTC tokens.

To redeem BTC, merchants will initiate a burn transaction (permanent removal of a token ), and custodians will be notified – they will release and send the BTC amount to the merchant’s address. Users can then claim their BTC directly from merchants with their WBTC.

Bitcoin users are restricted to only using BTC on the Bitcoin blockchain. But, they often invest seek versatile crypto assets, like WBTC tokens, which function like Ethereum tokens and can generate yield revenues.

The WBTC token can be stored in Ethereum wallets like other wrapped tokens on the Ethereum blockchain – they can’t be used on the bitcoin network, nor do they qualify as “real” bitcoin reserves.

 

What Is Wrapped Bitcoin (WBTC) Used For?

WBTC, like many wrapped tokens, can be used for several purposes in decentralized finance. The Ethereum DeFi ecosystem is incredibly lucrative because users can earn liquidity mining revenue, partake in yield farming, earn interest from decentralized lending pools, and even margin trade on decentralized exchanges.

If users want to earn an APY(annual percentage yield), they could deposit their WBTC and be a liquidity supplier in lending protocols such as AAVE.

Similarly, a more risky option would be to deposit WBTC into liquidity pools such as Curve, where they earn yield farming revenue.

The most common use for WBTC tokens is participating in a DeFi ecosystem where individuals can use decentralized finance to generate revenue.

Since its launch in 2020, it has rapidly grown in popularity and utility. WBTC can be used in any smart contracts on the Ethereum blockchain and decentralized applications within the Ethereum ecosystem.

The Ethereum ecosystem is the largest of all; with new DApps being deployed daily, it means that there are more possibilities for WBTC holders to generate revenue in unique ways.

However, Ethereum’s scalability has been a major issue for a long time and often leads to a congested network – this makes it expensive to use the network sometimes and can lead to an unsatisfactory experience for users.

 

Where To Buy Wrapped Bitcoin (WBTC) Tokens

Wrapped Bitcoin (WBTC) is the 16th largest cryptocurrency globally by market cap.

WBTC tokens can be purchased on several centralized crypto exchanges. But, before you’re able to purchase WBTC, you’ll need to deposit Bitcoin, and sequentially WBTC tokens will be credited to you.

WBTC is commonly available on decentralized exchanges like Uniswap.

The crypto exchanges below are the safest place where you can buy, sell and store the WBTC.

Five of the most popular crypto exchanges are:

1. Binance
2. Coinbase
3. KuCoin
4. HTX
5. Gate.io

All of the above exchanges allow users to buy, sell, transfer, and store WBTC in a digital wallet on the exchange. Some exchanges will allow you to use your debit or credit card to purchase WBTC on centralized exchanges.

If you intend on transferring your WBTC tokens to a wallet off of the exchange – you can choose to send them to a wallet such as Metamask (use Ethereum Mainnet Address) or other compatible wallets.

How long has Wrapped Bitcoin (WBTC) existed?

Wrapped Bitcoin (WBTC) was officially launched in January 2019.

Initially, it was available mainly on decentralized exchanges like Uniswap. Since then, it has been listed on most major centralized exchanges, including Coinbase and Binance.

What’s controversial about Wrapped Bitcoin (WBTC)?

There is often a lot of controversy surrounding crypto projects – Some controversy has surrounded wrapped Bitcoin (WBTC) since its launch. Let’s take a look at the top controversy surrounding WBTC dao.

• It’s Not “Real” Bitcoin – Wrapped BTC is an ERC20 token that represents bitcoin and isn’t actual BTC. Users deposit their BTC in exchange for WBTC. Although the token is pegged 1:1 with BTC, it still isn’t “real” Bitcoin.

  Users have access to a more versatile version of Bitcoin, which allows them to generate revenue in unique ways, but – it isn’t real BTC.

How many Wrapped Bitcoin (WBTC) tokens are there?

At the time of writing, WBTC has a circulating supply of 275,330 tokens.

The total supply of WBTC is 275,330.

Can Wrapped Bitcoin (WBTC) be mined?

You can’t mine WBTC. However, individuals can use their WBTC to participate in DeFi applications that can generate revenue for them.

Even though WBTC is an ERC20 token, it is issued and burned according to supply and demand. This is necessary to maintain an accurate and transparent balance of the supply.

What is the market cap of Wrapped Bitcoin (WBTC)?

The market cap of Wrapped Bitcoin (WBTC) is:

Wrapped Bitcoin (WBTC) market cap = total amount of coins in circulation x current market price of WBTC

Wrapped Bitcoin (WBTC) Market Cap = 275,330 x $45,280 = $12.46 billion (16th largest market cap)

The market cap fluctuates according to circulating supply and market price.

Biggest Competitors Of Wrapped Bitcoin (WBTC)

Wrapped BTC is a unique asset that is pegged to the price of BTC. Essentially it functions by providing versatility and added utility to bitcoin. However, there are other wrapped versions of BTC on the market competing to become the most used wrapped Bitcoin tokens.

Some notable competitors are:

• renBTC (124th largest market capitalization – Ethereum Blockchain)
• BTCB (204th largest market capitalization – BNB Chain)

 

What are the future plans for Wrapped BTC

The future of WBTC includes increasing its market capitalization. Since its launch, it has experienced significant growth in market capitalization and is currently the 16th largest crypto asset by market capitalization.

It is extensively used to provide more liquidity to DeFi ecosystems, and as it grows in popularity and utility, the project will endeavor to increase its market cap.

It is most notably used in lending protocols and liquidity pools, allowing individuals to generate revenues from yield farming.

Pros and Cons of Wrapped Bitcoin (WBTC)

Pros:

• Can Be Used In DeFi – Because the token is wrapped into an ERC20 token, it can be used in any smart contract on the Ethereum blockchain. Whereas conventional Bitcoin doesn’t have this functionality.
• It Is Backed By BTC – In order for users to obtain WBTC, there is a transparent and concise process that needs to take place. The process involves depositing BTC, merchants initiating the transaction, and custodians sequentially minting new WBTC. This process ensures that every WBTC token is backed by BTC and, therefore, maintains the tokens’ integrity and the total supply.
• Pegged 1:1 with BTC – The WBTC fluctuates only according to the price of BTC. No other external factors can affect the price of WBTC tokens. When WBTC has been redeemed, the token supply decreases, and when WBTC is minted, the token supply is increased – the price remains consistent with the cost of Bitcoin.

 

Cons:

• It Isn’t Real Bitcoin – Wrapped Bitcoin is not actual Bitcoin; it is a tokenized version of Bitcoin with enhanced utility. Some of the additional utility of WBTC includes it being compatible with DeFi applications on the Ethereum blockchain. However, the token isn’t actually Bitcoin and can’t be used on the Bitcoin blockchain. Bitcoin holders essentially exchange their BTC for WBTC and thereby no longer have Bitcoin but rather a tokenized, pegged version of BTC.
• It Is More Centralized – One of the major cons of Wrapped Bitcoin is the fact that it relies on custodians who issue the tokens. This makes the token much more centralized and increases the risk of purchasing the asset. Essentially, individuals are depending on custodians to fulfill the request and mint or redeem WBTC, but this process is centralized.

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