Wrapped Bitcoin

So, what is a wrapped Bitcoin? A Wrapped Bitcoin is basically an ERC-20 token that represents Bitcoin (BTC) on the Ethereum blockchain and it is integrated with Bitcoin so you can use it for Ethereum wallets, decentralized apps, known as DAB or DeFi (decentralized finance).

So, what is an ERC-20 Ethereum token? It is considered a kind of standard; a blueprint people use to crate tokens. And many of the coins out there use this standard also known as the Ethereum network. And because of this, they all function the same; they can talk to each other and are compatible. You can put this ERC-20 in your ether wallet or your metamask wallet. And this “wrapped WBTC” is backed 1 to 1 by Bitcoin. It is similar to the stablecoins that are backed up by gold or fiat currency. But since Bitcoin doesn’t play well with ERC-20 tokens within the Ethereum network, it is “wrapped” and now it can be used within this platform. In the past, Bitcoin owners were frustrated because they couldn’t use them unless they converted it, sold it to something else, or changed it into a different cryptocurrency or altcoin.

Now in DEFI, you could use a Wrapped Bitcoin for securing a loan, a crypto base loan, do a margin trading, and even earn interest in some of these decentralized lending pools. A lot of people can use them for collateral to back up a loan. It has a power of Bitcoin. But now it can be used at all these other platforms. As soon as Bitcoin is wrapped, that cryptocurrency is held in reserve; it’s fully transparent, and you know exactly how many Bitcoins have been wrapped or converted into WBTC.

Some people like to hold other Bitcoin. WBTC Bitcoin is controlled by a decentralized autonomous organization. So, a lot of people feel that’s more secure and basically a token is a crypto currency that’s tied to a value of another cryptocurrency. It’s wrapped. It’s put in a wrapper, as they call it, and it’s like putting a digital bolt and storing so it gives you other options. And you can unwrap it at any point or convert it back to the original token. Are there any limitations? You need to the custodian holding your Bitcoin. But it does open quite a few options.