Wrapped Bitcoin

What is Wrapped Bitcoin (WBTC)?

Wrapped Bitcoin (WBTC) is version of Bitcoin with ERC-20 token which is located on the Ethereum blockchain. ERK-20 is the fundamental interoperability standard for Ethereum. Thus, this allows the WBTC token to be fully integrated into the DeFi processes of the Ethereum network.

Bitcoin supports the WBTC token at a 1:1 ratio. This indicates that the BTC equivalent of each newly issued Wrapped Bitcoin token is held in reserve. This ensures that the value of the token is constantly pegged to the price of Bitcoin, allowing for decentralized and independent liquidity transfers between the BTC and ETH networks. Check out the Wrapped Bitcoin price chart above to see the current price of WBTC.

The WBTC coin is minted and burned automatically. users exchange their tokens for bitcoins at any time through a network of sellers and custodians. The number of tokens in circulation is related to the number of Bitcoins in the WBTC network. This is so because Bitcoin supports the Wrapped Bitcoin token at a 1:1 ratio, as mentioned earlier.

However, note that since the price of Bitcoin is quite volatile, so is the price of wrapped Bitcoin. It tends to fluctuate due to various factors affecting the entire crypto market. Thus, before converting Bitcoins to WBTC tokens, it would be a good idea to analyze the WBTC price chart to determine the main price trends.

The Companies Behind the Bitcoin Wrapper

The founders of the Wrapped Bitcoin crypto project are Ren, BitGo and Kyber Network.

Ren is a company that specializes in integrating crypto assets and DeFi applications across multiple blockchains. Except, is an organization that creates new WBTC tokens and burns old ones keep the WBTC to Bitcoin ratio at 1:1.

BitGo provides trading, custody and financial services for institutional digital assets. In addition, WBTC tokens and the keys needed to create tokens are stored in BitGo. In other words, it is the custodian of WBTC.

Kyber Network is an on-chain liquidity protocol that allows token trading without the use of intermediaries. Just like Ren it is responsible for the process of minting and burning WBTC tokens.

Key Benefits of Packaged Bitcoin

The problem with Bitcoin is that its functionality is quite simple by modern standards. This is not the case for Ethereum as it was designed specifically for more advanced use thanks to smart contracts it hires.

Thus, the Wrapped Bitcoin version of the token can be easily used in advanced Ethereum processes. It is also important to note that the average Ethereum block time is around 15 seconds. On the other hand, the block time of Bitcoin is around 10 minutes. Thus, By using WBTC tokens you can get much faster transaction speeds. compared to using the original version of Bitcoin.

Moreover, WBTC is also beneficial for the Ethereum network as it brings in a huge amount liquidity it comes from the Bitcoin market.

In addition, VBTC simplifies the operation of Ethereum-based exchanges and wallets. How? They can support WBTC activity simply by using an Ethereum node, eliminating the need to host two separate nodes for the Ethereum and Bitcoin networks.

Again, be sure to take a look at the Wrapped Bitcoin price chart above to see how the WBTC price changes in real time.

The main parties in the wrapped Bitcoin system

The Wrapped Bitcoin ecosystem consists of four main participants: custodians, merchants, users and members of the WBTC DAO.

The ecosystem starts with a custodian, in this case BitGo, who is responsible for storing WBTC. Then there is a merchant (Kyber Network, Ren or other merchants dealing with WBTC) who is responsible for issuing and burning tokens. And, of course, there are users who own WBTC tokens.

Finally, there is the WBTC DAO, which is the governance organization for the WBTC tokens. He is responsible for modifying contracts and adding and removing guardians and merchants. WBTC DAO promotes decentralization of the network through multisignature contracts. Contracts require the unanimous consent of all participants before any changes can be made.

Convert BTC to WBTC and vice versa

It is quite easy to exchange BTC tokens for WBTC tokens and vice versa. If you want to convert BTC to WBTC, you need to visit Kyber Network. (or any other merchant listed on the WBTC partners page) and transfer your BTC to the platform.

The seller informs BitGo (the custodian) of the amount of WBTC that will be released upon receiving BTC from the user. BitGo then generates an identical amount of WBTC after 6 BTC transaction confirmations. Finally, WBTC is sent to the user’s Ethereum wallet.

Now, if you want to exchange WBTC for BTC, you will have to contact the seller again. The merchant will perform a burn transaction for the amount of WBTC you wish to exchange.

BitGo will transfer the amount of requested BTC to the seller’s Bitcoin address after receiving 25 Ethereum block confirmations. The write request is marked as completed by the custodian via an Ethereum transaction. After the user goes through KYC processthe seller transfers BTC to the user’s Bitcoin wallet address.