WBTC

Overview of WBTC

Wrapped Bitcoin (WBTC) is a type of cryptocurrency, classified as a token. It was created in 2019 by BitGo, Kyber Network, and Ren. WBTC operates on the Ethereum platform, effectively bridging Bitcoin and Ethereum by allowing Bitcoin to be used in a manner akin to Ethereum's ERC-20 tokens. This means that WBTC can be used in Ethereum's varied array of decentralized applications, thus expanding the utility of existing Bitcoin.

WBTC is designed to maintain a 1:1 parity with Bitcoin, meaning 1 WBTC is intended to always roughly equate to the value of 1 Bitcoin. The purpose of creating WBTC was to bring Bitcoin's widespread recognition and value into the faster, more flexible Ethereum network.

The circulation of WBTC tokens is overseen and regulated by a Decentralized Autonomous Organization (DAO), made up of several reputable blockchain organizations. Transactions involving WBTC can be conducted on various exchanges, including Binance, Coinbase Pro, and Kraken. Lastly, storage of WBTC can be accomplished using any wallet that supports ERC-20 tokens, such as Metamask, Trust Wallet, Ledger, and Trezor.

Pros and Cons

What Makes WBTC Unique？

Wrapped Bitcoin (WBTC) can be regarded as innovative due to its unique approach of fusing the value and recognition of Bitcoin with the flexibility and functionality of Ethereum's ecosystem. Unlike traditional cryptocurrencies, it functions as an ERC-20 token on the Ethereum blockchain, while maintaining its intrinsic value tied to Bitcoin.

One of the key distinctions of WBTC from other cryptocurrencies is its model of operability. Its Ethereum-based platform enables Bitcoin to be used in a more versatile manner akin to ERC-20 tokens. This allows WBTC to be utilized in Ethereum's extensive array of decentralized applications (dApps), broadening its utility beyond that of traditional Bitcoin.

Moreover, WBTC maintains an approximate 1:1 value parity with Bitcoin, meaning the value of 1 WBTC is intended to be equivalent to that of 1 Bitcoin. This is distinct from other cryptocurrencies whose values are not designed to track the value of any other digital or physical assets.

How Does WBTC Work？

WBTC is a wrapped Bitcoin token, which means that it is a representation of Bitcoin on the Ethereum blockchain. To receive WBTC, a user must request tokens from a merchant. The merchant will then perform KYC/AML procedures and verify the user's identity. Once this is completed, the user and merchant will execute a swap, with Bitcoin from the user transferring to the merchant and WBTC from the merchant transferring to the user.

Minting is the process of creating new WBTC tokens. This is initiated by a merchant and performed by a custodian. Burning is the process of redeeming Bitcoin for WBTC tokens. This can only be done by merchants. The amount to be burned is deducted from the merchant's WBTC balance and the supply of WBTC is reduced.

Exchanges to Buy WBTC

1. Binance: Supports buying WBTC with various local currency pairs, including USD, EUR, GBP, BRL, amongst others, as well as cryptocurrency pairs, such as BTC, ETH, and BNB.

2. Coinbase Pro: Wrapped Bitcoin can be exchanged for USD and BTC.

3. Kraken: BTC and USD are the trading pairs offered for WBTC closer to the marketplaces server.

4. Bitfinex: WBTC can be traded with USD, BTC, and ETH on this platform.

5. OKEX: Offers a vast array of trading pairs for WBTC, including but not limited to USDT, BTC, ETH.

How to Store WBTC？

Storing WBTC (Wrapped Bitcoin) essentially involves utilizing wallets that support ERC-20 tokens since WBTC operates on the Ethereum blockchain platform.

For online storage, there are a number of software wallets available such as

1. MetaMask: A browser-based wallet often used for interfacing with dApps on the Ethereum network.

2. Trust Wallet: This is a mobile wallet offering an intuitive interface and a high level of security.

3. MyEtherWallet: A GUI interface to the Ethereum blockchain, allowing access to your Ethereum keys to interact with the blockchain directly.

If security is the main concern, Hardware wallets offer an extra level of protection by storing your keys offline:

1. Ledger: An industry leader for hardware wallets, Ledger's devices are widely supported and offer a high level of security.

2. Trezor: A reliable and trusted hardware option that supports a vast array of cryptocurrencies, including WBTC.

Should You Buy WBTC？

Buying WBTC might be suitable for a variety of individuals depending on their goals and familiarity with cryptocurrencies.

1. Bitcoin Holders: Since WBTC maintains a 1:1 value with Bitcoin, Bitcoin holders might find value in WBTC due to its ability to interact with Ethereum's DeFi ecosystem. This essentially provides Bitcoin holders new avenues for investment and usage.

2. DeFi Enthusiasts: Those already engaged or interested in Decentralized Finance (DeFi) could benefit from WBTC as it provides a way for Bitcoin value to be used within a number of these platforms.

3. Blockchain Developers: Developers looking to create innovative financial tools or applications that leverage the value of Bitcoin within the Ethereum ecosystem may find WBTC a useful asset.

FAQs

Q: Can you explain what Wrapped Bitcoin (WBTC) is？

A: WBTC is a cryptocurrency token that represents Bitcoin on the Ethereum blockchain, allowing Bitcoin to be utilized in Ethereum's suite of decentralized applications.

Q: Why was Wrapped Bitcoin created？

A: WBTC was developed to integrate Bitcoin with Ethereum's network, opening up additional functions and uses for Bitcoin within Ethereum's extensive DeFi ecosystem.

Q: How is WBTC's value determined？

A: The value of WBTC is designed to have a 1:1 parity with Bitcoin, meaning that the value of one WBTC should approximately equal the value of one Bitcoin.

Q: What are the advantages and drawbacks of using WBTC？

A: The primary advantage is the integration of Bitcoin into Ethereum's DeFi ecosystem, while the core drawback is the reliance on third-party custodians, introducing an element of trust not found in traditional cryptocurrencies.