This is where Wrapped Bitcoin, or WBTC, steps in to bridge the gap.
It does this by representing Bitcoin on the Ethereum blockchain as ERC-20 tokens, known as wrapped BTC.
What is Wrapped Bitcoin?
Wrapped Bitcoin is a tokenized representation of Bitcoin on the Ethereum blockchain.
It enables users to pull up the benefits of Bitcoin while leveraging the capabilities of the Ethereum online grid.
The process of wrapping Bitcoin involves locking up Bitcoin and issuing wrapped BTC tokens in return.
For every WBTC token in circulation, there is an equivalent amount of Bitcoin held by custodians.
One important aspect of Wrapped Bitcoin is the transparency and accountability of the token supply.
The amount of wrapped BTC in circulation should always match the amount of underlying Bitcoin held in custody.
Wrapped Bitcoin is designed to offer several advantages over traditional Bitcoin.
Additionally, Wrapped Bitcoin enables users to earn interest on their Bitcoin holdings.
By depositing wrapped BTC into lending platforms or liquidity pools, individuals can generate passive income with their Bitcoin.
This opens up new revenue streams for Bitcoin holders who want to make the most of their assets.
Furthermore, the wrapped tokens bring stability and security to the volatile cryptocurrency market.
This allows users to enjoy the benefits of using Bitcoin while mitigating the risk of sudden value swings.
In summary, Wrapped Bitcoin is a tokenized representation of Bitcoin on the Ethereum blockchain.
How does Wrapped Bitcoin work?
The process of wrapping Bitcoin involves several key steps and participants.
The role of custodians
Custodians play a vital role in the functioning and security of Wrapped Bitcoin.
They are trusted entities responsible for holding the Bitcoin that is locked up when wrapped BTC tokens are issued.
Using a hardware wallet or a secure wallet system is recommended to ensure the safety of the tokens.
Throughout this article, we explored the concept of Wrapped Bitcoin, its functionalities, and its advantages.
