What is Wrapped Bitcoin (WBTC)? | Wrapped Bitcoin Explained in Under 60 Seconds

Wrapped Bitcoin is a tokenized version of Bitcoin (BTC) that represents Bitcoin on the Ethereum blockchain. The Wrapped Bitcoin Token (WBTC) is an ERC20 token that tracks the value of Bitcoin, and the first ERC20 token backed 1:1 with Bitcoin.

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WBTC can be fully integrated into the Ethereum ecosystem of decentralized finance (DeFi) applications. Being on the Ethereum blockchain, WBTC has much faster transaction times compared to actual Bitcoins.

Wrapped Bitcoin (WBTC) standardizes Bitcoin to the ERC20 format, creating smart contracts for Bitcoin and making it easier to write smart contracts that integrate Bitcoin transfers.

DECENTRALIZED APPLICATIONS
DAPPs can now leverage Bitcoin payments in smart contracts for lending protocols, funds, token sales & more.

PROOF OF RESERVE
Bitcoin reserves are verified through a “proof of reserve” system that verifies the 1:1 backing between minted WBTC tokens & Bitcoin stored by custodians.

RECEIVING
To receive WBTC, a user requests tokens from a merchant. The merchant then performs the required KYC / AML procedures and verifies the user’s identity. Once this is completed, the user and merchant execute their swap, with Bitcoin from the user transferring to the merchant, and WBTC from the merchant transferring to the user.

MINTING
Minting refers to the process of creating new wrapped tokens. Minting in the wrapped framework is initiated by a merchant and performed by a custodian.

BURNING
Burning is the action of redeeming Bitcoin for WBTC tokens, and only merchant addresses can do this. The amount to be ‘burnt’ is deducted from the merchant’s WBTC balance (on chain) and the supply of WBTC is then reduced.

TRADING
Limited to ERC20 tokens, decentralized exchanges suffer from low trading volume and liquidity. With Wrapped BTC, users experience increased liquidity and participation. The Ethereum network processes transactions faster than the Bitcoin network, but Bitcoin holders don’t have to wait anymore. With WBTC, moving Bitcoin between exchanges is much faster.

WEBSITE: https://wbtc.network/