
An acronym for wrapped bitcoin (BTC); a wrapped cryptocurrency that functions as an ERC-20 token and is pegged to the price of bitcoin (BTC). It is designed to overcome the inconsistencies (or incompatibilities) between the traditional bitcoin blockchain and the Ethereum blockchain. It created a one-to-one peg to the original BTC. Wrapped bitcoin (wBTC) is an ERC-20 token that’s backed by or is pegged to bitcoin (BTC) on a 1:1 basis. This cryptocurrency is deployed on the decentralized finance (DeFi) platforms. The original asset is ‘wrapped’ into a digital vault, and a newly minted asset is created to transact on other platforms. Wrapped bitcoin helps introduce the value embedded in the bitcoin to the domain of decentralized finance, dApps, and more.
Wrapped bitcoins (wBTC) are minted on Ethereum (and other networks) and are backed by an equal amount of bitcoin held as collateral with a custodian (see: custodial wrapped tokens). These coins provide bitcoin price exposure for users of decentralized finance (DeFi) and makes BTC-pegged assets existing outside of its native networks for trading against other coins, for decentralized lending/ borrowing, among other activities.
A wrapped bitcoin provides liquidity and increases accessibility to DeFi space, allowing bitcoin holders to avail Ethereum’s ecosystem while retaining the value of their holdings. It also allows users to participate in various market activities such as trading, lending, and yield farming without having to sell their bitcoin holdings.
Wrapped cryptocurrencies (also wrapped cryptocurrency tokens) are digital assets that mirror the value of another crypto (or cryptocurrency) that was created on a different blockchain. Wrapped cryptocurrencies are created to foster interoperability between different networks, allowing digital assets from one blockchain to be seamlessly used on another. Non-native assets can be used on any blockchain, while establishing bridges between networks and enabling interoperability in the crypto space.
There are various types of wrapped cryptocurrencies (see: types of wrapped cryptocurrencies), depending mainly on the original asset pegged to. One example of a wrapped token is wrapped bitcoin (wBTC), which mirrors bitcoin on another network: the Ethereum blockchain. Another example is wrapped ether (WETH), representing a tokenized version of Ether on the Ethereum platform. This allows users to avail and benefit from the unique features and services offered on different networks in the crypto space.
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