E&S Token Review: Wrapped Bitcoin (WBTC)

Hello Publish0x community and welcome back in this new article of my “Easy & Short Cryptocurrencies Made Accessible” area.

With this article we are going to introduce the 47th cryptocurrency of this section with the 100th “E&S” article.

We are almost at 50 crypto analyzed in our “Easy & Short”!

Today we start to see another crypto. As probably have you already read from the title, we will talk about Wrapped Bitcoin (WBTC)!

In the last review, I talked about ApeCoin (APE), If you missed my last review, you can recover it here: https://www.publish0x.com/easyshort-cryptocurrencies-made-accessible/e-and-s-ape-leader-for-the-metaverse-xxzvwjz

Let's start with the basic: what is a WBTC?

The project is part of the Wrapped Tokens initiative started by Kyber Network, BitGo y Republic Protocol. The initiative, which began on Jan. 24, 2019, sought to create a token representing Bitcoin within the Ethereum blockchain. The goal was to create a bridge that would allow Bitcoin users to inject liquidity into the greedy DeFi and DApp ecosystems that were emerging and growing at the time.

To achieve this goal, these three figures joined forces to create a centralized custody platform managed by BitGo, with which one could interact using a series of smart contracts or smart contracts on Ethereum. This created a federated governing body that could represent the token by giving a high degree of trust by decentralizing some token management parameters. In this way, all participants are assured that their money is not only safe, but also guarded by reputable entities in the ecosystem.

Wrapped Bitcoin (WBTC) is an ERC-20 token issued with a dedicated smart contract that allows its supply to be varied so that its value is constant at 1 Bitcoin. Specifically, every time a bitcoin (BTC) is immobilized, 1 Wrapped Bitcoin token (WBTC) is issued. It is therefore effectively a stablecoin collateralized 1:1 with BTC, similarly as USDT is collateralized 1:1 with USD.


Image source: https://cryptoandfire.com/wrapped-bitcoin-review/

Why Wrapped Bitcoin?

The token was created because BTC can only be used on their native blockchain, which, however, as they do not support smart contracts, do not make DApp development possible. Since the Wrapped Bitcoin WBTC is an ERC20 token with the same value as BTC I can use it on Ethereum or Ethereum-compatible networks, thus on platforms such as Curve or Uniswap. In this way I can trade on the Ethereum blockchain but get exposure on BTC. I can then do farming, lending, trading and so on using BTC.

Bitcoin Wrapped and Bitcoin: what is the link?

It is actually a very close link, because each WTBC in circulation corresponds to one Bitcoin in custody. This leads to several very interesting features of WBTC:

  • Full equivalence: What this means. It means that when we are in possession of a Wrapped Bitcoin or any fraction thereof, we can be assured today that we can convert it into the classic version, thanks to the intermediary role occupied by BitGo. This is why using WBTC is just as safe, in terms of value, as operating in BTC. Security is, of course, inextricably linked to the credibility that the intermediary has in this case. It might be complicated to trust a less transparent design. But with the current setup we have mathematical certainty that the underlying exists and that no fractional reserve system is being used. A huge step forward from several stable coins circulating pegged to fiat currencies.
  • Representation: With such a system behind it, everyone can exchange WBTC with reasonable certainty that there is a Bitcoin behind it. And that means for a huge number of DApps, DEX, as well as smart contracts to be able to reference or use as collateral something that has the exact same value as Bitcoin and is also physically represented by it. With BTC remaining the best-capitalized cryptocurrency in the world, it is not hard to see how beneficial this is for these types of projects, as they include in the most interesting and vibrant circle in the crypto world, what is historically regarded as blockchain gold.

Next week we'll see new details about Wrapped Bitcoin!

I invite you to follow me so you don't miss the second part of the article that will be released next Sunday.

Do you use WBTC into DApps?




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MikeZillo Verified Member

Daily Trader, Mining Farm Project Manager, Blockchain consultant, Cryptocurrency evangelist. You can find more videos here https://www.youtube.com/channel/UCvyXx6I1C__zmLAYUXNZwQQ? Telegram: @mikezillo

Easy&Short. Cryptocurrencies made accessible
Easy&Short. Cryptocurrencies made accessible

In this section, we are going to create two article per each cryptocurrency/token. The first one will be technical, with a simplification of the Whitepaper and the second one will be about particulars of the coin. For example staking yields, particular functions and so on! I am sure you will like this very much!

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