Wrapped BTC has evolved to be the top tokenized BTC asset, ascending as one of the first ten digital cryptos by market cap in January 2021. It is an ERC20 token that allows bitcoin owners to employ tokenized bitcoin in ETH-powered centralized software and exchange it on decentralized platforms.
If BTC becomes wrapped, the currency becomes stored in a wallet by the BitGo Trust. With WBTC aiming to be open (a thing other stablecoins have found difficult) the amount in use all over the market has been announced – with evidence that the main asset, BTC, is held safely in reserve.
To transform BTC into WBTC, people who own Bitcoin have to employ merchants like WBTC.cafe or AirSwap so their coin will be held by a custodian.
At the same time, ETH holders can exchange ETH, USDT, and other forms of ETH-based token to WBTC on centralized exchanges such as Kyber or Uniswap to use the tokenized asset.
Though, when you tokenize BTC into WBTC, more possibilities come about.
The most notable possibility is being able to participate in the expanding centralized finance market to receive profit from BTC. Due to this, Defi traders accepted the tokenized bitcoin so much.
Using Tokenized bitcoin in Defi
Currently, Wrapped BTC has a market cap that is above $4.6b, placing it as one of the biggest digital currencies by total market valuation.
The sporadic rise of tokenized bitcoin can be attached to two things: the Bitcoin rally and splurging DeFi market.
What role does WBTC play?
ETH-based Bitcoin users can employ Wrapped BTC as collateral to procure crypto-insured loans to invest in a business or to station leveraged cryptocurrency investment tips. Contrarily, WBTC owners can place their coins in a centralized lending protocol to receive interest. For example, on Compound, those who deposit Wrapped BTC receive 0.09% App. The holders who are okay with taking on more risk can place their tokens onto liquidity pools to receive fees and mining profits (usually in the form of tokens).
Seasoned traders also make use of Wrapped BTC to trade with margins at decentralized exchanges like Fulcrum. Rather than funding BTC at derivatives platforms, traders can station tokenized bitcoin on derivatives trading software run on a smart contract that will improve asset safety while trading.
Benefits of Wrapped Tokens
They give the holders of digital currencies freedom to access other blockchains. A big part of the DeFi ecosphere is premised on the ETH network instead of the Bitcoin blockchain. This might be very tiring for BTC holders, which makes it almost impossible for them to get into the market except they trade their digital currencies or purchase another.
After the launch of the WBTC.network in January, several DeFi protocols like Dharma, Compound, etc, have started permitting lenders to utilize Wrapped BTC as collateral. Which can then be stored upon a smart contract, such that cryptocurrency loans are normally released with the aid of the DAI stablecoin on the ETH ecosystem.
The WBTC project is supervised by the WBTC DAO, where DAO implies Decentralized Autonomous Organization.
How can I get Wrapped BTC?
Various official platforms support WBTC like Coinlist. In a few instances, you might be expected to go through KYC checks to get your identity verified. Otherwise, you can access it via a DEX, which is the short form of a decentralized exchange.
The process of tokenizing BTC is quite direct too.
In the Crypto World, there have been several pushes for better networks amidst top blockchains such as ETH and BTC, and with what has been observed, Wrapped BTC tokens assist in providing that.
Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.