In the world of cryptocurrencies, Bitcoin (BTC) has been one of the most influential and valuable digital assets. However, with the rise of Decentralized Finance (DeFi) and Smart Contracts, Bitcoin cannot be used directly on blockchains such as Ether, which has given birth to theWrapped Bitcoin (WBTC) The concept of WBTC. So, what is WBTC? How is it different from traditional BTC? This article will give you an in-depth understanding of how WBTC works, what it is used for, and how it will change the way assets work in the cryptocurrency ecosystem.
What is Wrapped Bitcoin (WBTC)?
Wrapped Bitcoin (WBTC) is an ERC-20 token issued on the Ether blockchain that represents the value of Bitcoin. Each WBTC token is equivalent to one Bitcoin (BTC), which means you can trade it in the Ether ecosystem or use it for DeFi (Decentralized Finance) applications without having to hold Bitcoin directly.The creation of WBTC solves the compatibility issue between Bitcoin and the Ether blockchain, providing more scenarios for the use of BTC.
WBTC is issued by the decentralized WBTCDAO and each WBTC token is backed by 1:1 Bitcoin. These Bitcoins are locked in a specific custodian and are managed in a transparent and auditable manner. When users need to convert WBTC back to BTC, they can do so through a partner custodian.
Key differences between WBTC and BTC
Blockchain: While BTC runs on the Bitcoin blockchain, WBTC is an ERC-20 token on Ether, which means it can seamlessly interact with other DeFi applications on Ether. For example, you can use WBTC for providing liquidity, lending, trading, and various other DeFi operations.
Mobility and Speed: Since Ether's block times are typically shorter than Bitcoin's, WBTC can provide faster confirmation times for certain operations. This gives WBTC an advantage over Bitcoin in terms of liquidity provision and transaction speed in DeFi.
Asset Management: BTC is native to the Bitcoin blockchain and is often traded on the Bitcoin network, which can come with higher fees and slower transaction speeds. As an ERC-20 token, WBTC can be supported by more decentralized exchanges (DEX) and can be more easily operated in Ether smart contracts.
Uses and Advantages of WBTC
The main advantage of WBTC is its ability to introduce the value of Bitcoin into the world of ethereum's smart contracts, enabling Bitcoin to participate in various decentralized finance (DeFi) activities on the ethereum blockchain. For example, WBTC can be used to participate in lending platforms, liquidity pools, and decentralized exchanges (DEX), all areas where BTC itself cannot directly participate.
WBTC also improves the efficiency and transparency of transactions. Due to its operation on the Ethernet blockchain, every transaction can be tracked and verified on the Ethernet blockchain, which ensures the transparency and security of the transaction process. For users who rely on decentralized, open and transparent operations, WBTC is undoubtedly an ideal choice.
How to convert from BTC to WBTC?
Converting BTC to WBTC is not an automated process. You need to do it through a partnering hosting organization (e.g. Kyber Network, Ren Protocol, etc.). The basic process is as follows:
- Choose a platform: Users first need to choose a partner platform that supports WBTC distribution.
- Submit BTC: Users transfer Bitcoins to the specified custodian's address and these Bitcoins will be locked in the custodian's wallet.
- Issue WBTC: The custodian issues WBTC corresponding to the amount of Bitcoin provided by the user.
- Transfer back to BTC: Users can also transfer WBTC back to Bitcoin, a process that involves an identical escrow process.
Such a process ensures a 1:1 value ratio for WBTC, while the handling fees and time delays incurred during the conversion process depend on the efficiency of the platform and the current blockchain congestion.
Risks and Challenges of WBTC
While WBTC has many advantages, there are also some risks. the value of WBTC is dependent on the trustworthiness of the custodian, and despite transparent auditing mechanisms, there is still a risk of manipulation or theft. Despite transparent auditing mechanisms, there is still a risk of manipulation or theft, and as an ERC-20 token, WBTC is still subject to Ether's transaction fees and network congestion, which may have an impact on the user experience.
With the popularity of WBTC, issues such as smart contract loopholes and disputes over governance rights may arise, all of which need to be carefully considered by users when participating.
Frequently Asked Questions Q&A
1. Are the values of WBTC and BTC the same?
Yes, every WBTC token is backed by 1 Bitcoin, so the market value of WBTC basically stays in line with the value of BTC.
2. On which platforms can I use WBTC?
WBTC is available on most decentralized exchanges (DEX) that support ERC-20 tokens, as well as on DeFi platforms like Uniswap, SushiSwap and others that support WBTC trading and liquidity provision.
3. How is WBTC secured?
WBTC is issued and hosted in collaboration with WBTCDAO, and each token's Bitcoin assets are audited and guaranteed by a third party to ensure the security and transparency of its assets.
This article provides an in-depth look atWrapped Bitcoin (WBTC) It also explains how WBTC is differentiated from Bitcoin (BTC) and explains the application landscape and how WBTC is used. Whether you are interested in the DeFi space or want to better understand WBTC, this information will help you get a handle on how this emerging cryptocurrency asset works.
English 
Chinese