WBTC stands for Coiled Bitcoin and it is an ERC-20 token representing only Bitcoin. One WBTC is equal to one BTC. BTC can be converted to WBTC and vice versa.
Having an ERC-20 token makes the transfer of WBTC faster than normal Bitcoin, but the main advantage of WBTC is its integration into the world of Ethereum wallets, dapps and smart contracts.
WBTC was launched on the Ethereum mainnet in January 2019. WBTC emerged as a collaboration project between major companies in the DeFi ecosystem such as BitGo, Ren, Dharma, Kyber, Compound, MakerDAO, and Set Protocol. The project is controlled by the Decentralized Autonomous Organization (DAO) called WBTC DAO.
Products like MakerDAO and Compound require users to lock down crypto assets to borrow other crypto assets. Because Ethereum’s overall value is significantly smaller than Bitcoin, it limits how large these protocols can grow. By introducing Bitcoin, protocols increase liquidity and thus create more sources of collateral for their dapps. WBTC also allows Bitcoin holders to continue holding as an asset while Bitcoin holders use DeFi dapps like Compound to borrow or lend money.
Compared to BTC, WBTC will never have the same level of security or insecurity as the original because it relies on people and organizations to manage the system instead of pure code.
To increase trust and transparency, WBTC goes through regular audits. It also broadcasts all on-chain transactions and verifications for Bitcoin and Ethereum networks. Users can independently verify how much BTC has been sent to the WBTC address on the Bitcoin blockchain, and then check whether these transactions match the creation of WBTC tokens on the Ethereum blockchain. WBTC’s reverse writing process can also be followed on the chain to get BTC back.
What Can Be Done With WBTC?
You can borrow and lend WBTC using Compound, or you can use WBTC to trade margin on bZx’s Fulcrum dapp.
How is WBTC Produced?
Users who own BTC and want to convert it to WBTC should interact with vendors. Vendors initiate the issuing or burning process of WBTC tokens by implementing verification procedures to authenticate users. The custodian keeps the real BTC wrapped and does the actual issuance and burning of the tokens on the Ethereum blockchain. When the WBTC is burned, the BTC is returned to the user from the custody of the custodian. When the new WBTC is printed, the BTC is retrieved from the user and stored by the custodian.
How Is It Obtained?
Since WBTC is an ERC-20 token, you can trade on decentralized exchanges such as Kyber or Uniswap.
If you want to trade BTC for WBTC, you can look at one of the WBTC vendors, Dharma, Kyber, Set Protocol, GOPAX, AirSwap, Prycto, Ren and ETHfinex.