What Is Wrapped Bitcoin (WBTC)? All You Need To Know

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Wrapped Bitcoin is an ERC-20 token. ERC-20 is an acronym that stands for Ethereum Request for Comment. Wrapped Bitcoin is an Ethereum ERC-20 token fully supported by Bitcoin. This is a way the Ethereum network offers Bitcoin holders the opportunity to take part in the rapidly expanding Defi ecosystem. Although Bitcoin is the first cryptocurrency, other Defi networks that came after bitcoin have certain better innovative services. Wrapped Bitcoin is ERC-20 token on the Ethereum network. And it fully represents Bitcoin in value.

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Through this, Bitcoin investors can partake in the various Defi Ethereum-based platforms. Ren, kyber network, BitGo (just to mention a few) are the institutes that developed the process of wrapping Bitcoin to ERC-20. An investor will initiate the minting of Wrapped Bitcoin. They send an amount of bitcoin to a custodian firm. This caretaker firm is ‘BitGo’. Then BitGo will produce the equivalent amount of WBTC and send it back to the investor. This process of making WBTC can also be reversed if the investor wants it reversed.

WBTC was launched in 2019. The advantage of buying WBTC over just Buying Bitcoin is that one can use this to partake in some business opportunities available in the expanding Defi ecosystem.

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Business Opportunity Through WBTC
1. It becomes easier and cheaper to use WBTC to transact business. It is like in the old times when currency notes are representing gold. In this same way, WBTC represents Bitcoin. This makes it easier to use it to transact business.
2. It offers Bitcoin the opportunity to be listed as a trading pair on various decentralized networks. Bitcoin cannot be directly listed as a trading pair on other Defi networks, but converting it to Ethereum’s ERC-20 affords it the chance. Most Defi networks are built on Ethereum.
3. Through the WBTC, investors can lend and borrow funds on decentralized financial platforms that support WBTC such as Aave, Balancer, Uniswap, Kyber Network, etc.
4. Bitcoin can be staked. It can be used as collateral to earn interest from them.

One major downside of this project is that transferring one’s bitcoin to a custodian means that one has also transferred the keys to the crypto to them. And that for the time being, he or she is not the owner of the crypto. This could be a bit uncomfortable for investors as they know that once one loses the key to the crypto account one has lost the crypto. There is this concern about how the new holder will keep the keys and not lose them.

 

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