#WrappedBTC

Wrapped BTC (Wrapped Bitcoin or WBTC) is an Ethereum-based token that represents Bitcoin in the Ethereum ecosystem. Here’s a clear overview:

🔍 What is Wrapped BTC?

Wrapped Bitcoin (WBTC) is an ERC-20 token on the Ethereum blockchain that is backed 1:1 by Bitcoin (BTC). This means:

  • For every 1 WBTC in circulation, there is 1 BTC held in reserve.

  • Users can "wrap" their BTC to receive WBTC or "unwrap" WBTC to redeem BTC.

💡 Why Wrap BTC?

  1. DeFi Access

    BTC isn’t natively compatible with Ethereum, but WBTC is. Wrapping BTC allows Bitcoin holders to:

    ○ Use their BTC in DeFi apps (like lending, borrowing, yield farming).

    ○ Trade BTC on Ethereum-based decentralized exchanges (DEXs) like Uniswap.

  2. Liquidity

    WBTC brings Bitcoin’s liquidity to Ethereum's ecosystem, benefiting DeFi projects.

🛠 How Does It Work?

  1. Custodian System

    A custodian (e.g., BitGo) holds the BTC and issues WBTC tokens on Ethereum.

  2. Merchants

    Merchants initiate the minting or burning of WBTC based on user requests.

🔐 Is WBTC Safe?

  • Trust-Based: Since WBTC relies on a custodian to hold BTC, it's not fully decentralized.

  • Audited & Transparent: WBTC reserves are publicly verifiable.

🔁 Alternatives

There are other wrapped Bitcoin tokens with different mechanisms:

  • renBTC – backed by the Ren protocol (more decentralized).

  • tBTC – aims to be trust-minimized and fully decentralized.