Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin (BTC) that works on the Ethereum (ETH) cryptocurrency blockchain.
WBTC is compliant with ERC-20, the underlying standard for the Ethereum blockchain. It allows WBTC to be fully integrated into the Ethereum blockchain ecosystem. Moreover, this integration makes it possible to open access to decentralized exchanges, cryptocurrency lending services, prediction markets, and other Decentralized Finance (DeFi) applications based on ERC-20.
WBTC is also supported by Bitcoin at a 1-to-1 ratio through a network of automatically controlled sellers and operators. In doing so, it ensures that its price is always tied to Bitcoin and allows users to transfer liquidity between the BTC and ETH networks in a decentralized and autonomous manner.
Wrapped Bitcoin was announced on October 26, 2018, and officially launched on January 31, 2019.
Who Created Wrapped Bitcoin?
The Wrapped Tokens project, of which WBTC is a part, was not founded by individuals, but rather became a joint project of three organizations: BitGo, Kyber Network, and Ren.
BitGo
BitGo was founded in 2013 by American scientist and entrepreneur Mike Belshe. It is an institutional digital asset custody, trading, and financial services firm.BitGo is not only one of the developers of WBTC but also acts as its original operator – the organization that holds the WBTC tokens and the keys needed to create them.
Kyber Network
Kyber Network is a blockchain liquidity protocol that allows the integration of various cryptocurrency tokens and DeFi applications. Kyber Network was founded in 2017 by Loi Luu, Yaron Velner, and Victor Tran. The company is based in Singapore. Together with Ren, Kyber Network helped create WBTC. Until today, Kyber Network serves as a salesperson on the WBTC network. It means that the company operates as an institution that mints and burns WBTC tokens to maintain a 1-to-1 token to BTC reserve ratio.
Ren
Like Kyber Network, Ren is a cross-blockchain-focused company. The company combines crypto assets and DeFi apps with solutions like RenBridge, RenVM, and some more. It was founded in 2017 by Taiyang Zhang and Loong Wang.
What is unique about Wrapped Bitcoin?
As the oldest and largest cryptocurrency on the market, Bitcoin boasts a huge user base and a pool of tens of billions of dollars in liquidity. However, by modern standards, the functionality of its blockchain can be characterized as relatively basic.
Unlike Bitcoin, Ethereum was built from the ground up to support more complex use cases through smart contract technology, leading to the emergence of an entire industry. It was named decentralized finance (DeFi).
Ethereum and derivatives offer their users advanced financial instruments like lending and insurance that are independent of intermediaries.
By wrapping BTC in the ERC-20 standard, WBTC ensures the full integration of a bitcoin-like asset into an advanced financial decentralized application environment. It also brings with it tremendous liquidity associated with the BTC market.
Moreover, Wrapped Bitcoin greatly simplifies the operation of exchanges, wallets, and payment services that work with Ethereum. Instead of running two separate nodes for the ETH and BTC networks, they can only support WBTC operations with an Ethereum node.
Finally, the average block confirmation time on Ethereum is about 15 seconds, versus 10 minutes for Bitcoin. Accordingly, the speed at which WBTC transactions can be carried out is much higher compared to real bitcoin.
How many Wrapped Bitcoin (WBTC) coins are in circulation?
There is no pre-set timetable for the release of WBTC. Instead, WBTC is automatically minted or burned whenever users buy or sell their tokens for Bitcoin through the merchant and custodian system.
Because Wrapped Bitcoin is always supported by Bitcoin at a 1-to-1 ratio, the amount of coins in circulation is directly related to the number of Bitcoin reserves in the WBTC network. As of October 2020, this number was about 94,000 tokens for a total value of about $ 1 billion.
How is the security of the Wrapped Bitcoin network ensured?
WBTC tokens are protected by the parent blockchain, Ethereum. In turn, ETH is protected by Ethash’s Proof-of-Work (PoW) feature, a representative of the Keccak family of hash functions.
Where can you buy Wrapped Bitcoin (WBTC)?
WBTC tokens are sold on a lot of exchanges, both centralized and decentralized. Decentralized exchanges also act as sellers (merchants) in the Wrapped Bitcoin network. Some of the main ones are:
- Uniswap
- Binance
- OKEx
- Huobi Global
- Kyber Network
