- Wrapped Bitcoin is a token that represents Bitcoin on the Ethereum blockchain.
- Wrapping $BTC makes the token an ERC-20 token. This means that $wBTC tokens allow $BTC holders to access dApps and DeFi protocols on the Ethereum.
Upon looking at some reviews about the advantages and disadvantages of using an iPhone over an Android, one caught my attention—some applications are Android-exclusive only and are not compatible with an iPhone.
Wanting to use an incompatible app on the iPhone is like wanting to use a certain cryptocurrency outside of its main blockchain, making it not compatible, which seems to be useless.
A Native Token on Another Blockchain: An Introduction to Wrapped Tokens
But what if I want to use Bitcoin on dApps and projects on the Ethereum network? Is it possible?
Thanks to wrapped tokens, which represent a certain native crypto or token standard with the same value as the original crypto. Basically, a wrapped token can be considered a stablecoin that is pegged to the token that it represents.
Because wrapped tokens are native tokens that are being used on other blockchains, they provide greater liquidity to decentralized services while boosting the utility of crypto assets, according to the online publication CoinDesk.
Bitcoin in the Ethereum Ecosystem
Wrapped Bitcoin ($wBTC) is a token that represents Bitcoin on the Ethereum blockchain. Since it is on a 1:1 ratio with $BTC, every $wBTC token in circulation means there is one BTC locked in a smart contract.
The Ethereum network is the home of most dApps and DeFi protocols, which offer a number of financial services, like lending, borrowing, trading, and investing. But most of them are compatible only with ERC-20 tokens.
Wrapping $BTC makes the token an ERC-20 token. This means that $wBTC tokens allow $BTC holders to access dApps and DeFi protocols on the Ethereum—benefitting from the security of Bitcoin while enjoying the functionality of Ethereum.
WBTC To PHP Price
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How to Wrap Bitcoin?
- Step 1: Send a request to a merchant, the entity that facilitates the conversion of $BTC to $wBTC and vice versa.
- Step 2: Wait for the merchant to send a Bitcoin address to the user after verifying their identity.
- Step 3: The merchant will then instruct a custodian, an entity that holds the actual $BTC in reserve and issues the corresponding $wBTC, to wrap the user’s tokens.
- Step 4: Wait for the custodian to send $wBTC to the user’s Ethereum address.
How to Unwrap wBTC?
- Step 1: Send a request to a merchant.
- Step 2: Wait for the merchant to send an Ethereum address to the user after verifying their identity.
- Step 3: The merchant will then instruct a custodian to unwrap the user’s tokens.
- Step 4: Wait for the custodian to send $BTC to the user’s Bitcoin address.
How to Buy wBTC?
Option 1: Connect to a merchant that supports wBTC, such as CoinList, Kyber Network, or RenVM.
Option 2: Use a decentralized exchange that supports wBTC, such as Uniswap, SushiSwap, or Balancer.
Option 3: Access a lending platform that supports wBTC, such as Compound, Aave, or MakerDAO.
This article is published on BitPinas: Wrapped Bitcoin | WBTC Guide and Usecase
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