What is Wrapped Bitcoin (WBTC)?

Wrapped Bitcoin (WBTC) is an Ethereum-based token representing Bitcoin on the Ethereum blockchain. It was necessary to establish WBTC due to the incompatibility between Bitcoin and Ethereum.

With Wrapped Bitcoin, investors can use their BTC on the Ethereum network, allowing them to utilize its decentralized applications (dApps) and smart contracts.

Who Created Wrapped Bitcoin (WBTC)?

Wrapped Bitcoin (WBTC) results from a joint project between Ren (known initially as Republic Protocol), BitGo, and Kyber Network. They launched this token on January 31, 2019, and had eight merchants supervising the BTC-to-WBTC conversions.

When the WBTC Decentralised Autonomous Organisation started, there were only three parties: Kyber, Ren, and BitGo. However, their numbers have increased recently to include many other companies and individuals.

The Wrapped Bitcoin Decentralised Autonomous Organisation (DAO) represents the stakeholders from the WBTC system. A multi-signature system secures the WBTC network, and its held by each of the stakeholders of the WBTC DAO.

How Does Wrapped Bitcoin (WBTC) Work?

A Wrapped Bitcoin (WBTC) works by replacing the original BTC, which goes to a trusted custodian. Wrapping a BTC token requires the actions of the Decentralised Autonomous Organisation, the merchants, and the custodians.

A Wrapped Bitcoin gets created when someone requests to give up their Bitcoin in exchange for an ERC-20 WBTC token. When the merchant accepts this request, they must verify the customer’s identity. The merchant would then initiate various Anti-Money Laundering (AML) and Know Your Customer (KYC) processes.

After verifying the customer’s identity, the merchant sends a request to a custodian. Right now, the only custodian available for WBTC is BitGo. The custodian would then mint the required WBTC tokens and send them back to the merchant.

The merchant and the customer can now swap their WBTC and BTC tokens. This can be done through an Atomic Swap (a peer-to-peer transaction) or a centralized exchange. In the end, the merchant would end up with the customer’s BTC, while the customer would end up with the WBTC.

The exchanged WBTC can be used on various ERC-20 supporting platforms to trade for various goods and services. Customers who wish to convert that WBTC back to BTC need to contact the merchant again. Another swap would occur, after which the merchant would destroy (or burn) the WBTC.

This cryptocurrency is supported by many exchanges like Coinbase, allowing owners to trade with them. However, most of these sites do not offer wrapping or unwrapping services for WBTC. This is peculiar to the chosen merchants like CoinList, Maker, Airswap, and AAVE.

Is Wrapped Bitcoin (WBTC) a Good Investment?

This crypto coin provides many advantages that were absent from the original Bitcoin. They offer faster transactions, the ability to use smart contracts, and easier movement of funds. This wrapped token allows investors to spend their Bitcoin on other ERC-20 blockchains.

All these advantages make the usefulness of the WBTC indisputable. The fact that a Wrapped Bitcoin has the same value as the original Bitcoin makes this better. As such, we can say that WBTC is an excellent investment.