An Ethereum-based token pegged to the price of Bitcoin which allows BTC holders to participate in Ethereum’s decentralised finance ecosystem.
Mission
Launched at the start of 2019, Wrapped Bitcoin seeks to marry Bitcoin’s huge user base and associated liquidity pool with the smart contract and DeFi capability of Ethereum.
‘Wrapping’ BTC in the ERC-20 standard allows users to transact with decentralised exchanges (DEXs) and decentralised applications (dApps) but lessens their exposure to price volatility – as they aren’t reliant on the price of ETH – with the price of WBTC tied 1:1 with BTC.
Use-cases
Users convert Bitcoin into WBTC for free, but merchants generally charge a fee when they convert it back into BTC. They are also charged Ethereum gas fees as they participate in the DeFi ecosystem.
Ethereum is much faster than Bitcoin – its block time is 15 seconds compared with 10 minutes on Bitcoin – so WBTC can be transacted far more quickly than BTC.
Founders
The larger Wrapped Tokens project was founded by the BitGo, Kyber Network and Ren organisations.
BitGo is a digital asset custody, trading and financial services firm and governs WBTC. Kyber Network is a liquidity protocol which enables the integration of cryptocurrencies and DeFi applications, and helps to maintain the 1:1 ratio of tokens to BTC reserves. Ren also facilitates the integration of cryptocurrency assets and DeFi applications across blockchains.
Economics
When users purchase WBTC, tokens are automatically created; when they sell them for Bitcoin, they are automatically burned. There is no predetermined schedule or limit for the number of tokens minted.