What is Wrapped Bitcoin (WBTC): Complete Guide for DeFi Enthusiasts and Investors
Wrapped Bitcoin (WBTC) is an Ethereum-based ERC-20 token backed 1:1 with Bitcoin. It enables Bitcoin holders to participate in decentralized finance (DeFi) applications on the Ethereum network, broadening Bitcoin's utility and access to the world of smart contracts.
Wrapped Bitcoin was launched in January 2019 as a collaborative project by BitGo, Kyber Network, and Ren to enhance the liquidity and interoperability within the DeFi ecosystem. It acts as a bridge for Bitcoin holders to access Ethereum-based applications using WBTC as an equivalent asset.
TECHNOLOGY
WBTC is a token on the Ethereum blockchain, following the ERC-20 standard, and is backed by Bitcoin held in custody by BitGo. The process involves trusted merchants and custodians to ensure transparency and verifiable reserves, maintaining the value and trust in WBTC as a reflection of Bitcoin on the Ethereum network.
USE CASES
Wrapped Bitcoin is predominantly used in the DeFi sector, providing Bitcoin liquidity to various protocols. Key use cases include: Earning interest on Bitcoin holdings through lending protocols; Borrowing against WBTC collateral; Trading on decentralized exchanges to leverage arbitrage opportunities; Participating in yield farming and liquidity pools.
FORECAST
With the growing adoption of DeFi, Wrapped Bitcoin may see increased demand as users seek to bridge Bitcoin's value into the Ethereum ecosystem. As the DeFi sector explodes, WBTC's role may expand, but its price will closely mirror Bitcoin's movements due to the 1:1 backing.
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