All about Wrapped Bitcoin (WBTC)
Wrapped Bitcoin (WBTC) is an ERC20 token that is backed 1:1 with Bitcoin.
Wrapped Bitcoin (WBTC) is an ERC20 token backed 1:1 with Bitcoin.
1. The main benefits of WBTC
WBTC brings more liquidity to decentralized exchanges (DEXs) and enables Bitcoin to be used for token trades.
WBTC enables the creation of smart contracts for Bitcoin. This allows dApps to use leverage Bitcoin e.g. lending protocols, prediction markets, etc.
WBTC differs from Algorithmic and Centralized Wrapped Tokens.
In Algorithmic Wrapped Tokens, the token's price follows a fiat currency. This is done by smart contracts that control the demand and supply.
In Centralized Wrapped Tokens, assets are stored with an entity that publishes proof of reserves.
2. How WBTC Works
There are 3 primary processes in WBTC - Receiving, Minting, and Burning.
Receiving
A user who has completed his KYC / AML checks requests WBTC from a merchant. A swap is executed in which Bitcoin is transferred from the user to the merchant, and WBTC is transferred from the merchant to the user.
Minting
Minting is the process of creating new WBTC tokens. Minting is initiated by a merchant and performed by a custodian (an institution that holds the Bitcoin).
Burning
Burning redeems Bitcoin for WBTC and can be done only by merchants. The burnt amount is deducted from the merchant's WBTC on-chain balance and the supply of WBTC is reduced.
3. Core Metrics
The core metrics of WBTC as of 11 Jan are:
Market Cap: US$ 7.26 billion
Volume (24h): US$ 663 million
Volume / Market cap (24h): 9.43%
Circulating Supply: 158,269 WBTC
Supported Wallets include Ledger, Coinbase, Trust Wallet, and MetaMask.