Episode 13 - What Is Wrapped BTC?

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The world of cryptocurrency is changing all the time. Everyday more and more kinds of digital currencies are being added at an unprecedented rate. Even when you think that you’ve finally got a firm understanding of Bitcoin and other cryptos, something else shows up that you need to learn: enter Wrapped Bitcoin. Wrapped Bitcoin and Wrapped Coins in general are brilliant innovations in the Cryptocurrency space.

What is a Wrapped Coins?  You can now take a cryptocurrency from one blockchain and “wrap” into a different blockchain to open up new possibilities. I will discuss in brief how it works.

Through an ERC-20 token, Wrapped Bitcoin (WBTC) represents Bitcoin (BTC) inside the Ethereum blockchain. It connects BTC to the Ethereum blockchain, where it can be used for decentralized finance and other applications that Bitcoin in it’s current state cannot participate in. It is a essentially a BTC cloned out of the Ethereum blockchain. This has some great advantages because you can bring the qualities of Bitcoin and Ethereum together in one protocol.

WBTC currently has over 40 members and is maintained by a group called the WBTC DAO, or Wrapped Bitcoin Decentralized Autonomous Organization. It was initially built by organizations such as Ren, BitGo, and Kyber.

Up until just a few years ago there wasn’t a strong bridge between Bitcoin and Ethereum. However, Wrapped BTC has provided a solution to this problem. This token works on a 1:1 basis with Bitcoin.

Benefits of Wrapped Tokens

One of the most obvious advantages of wrapped coins in general, not just WBTC is that they give owners the freedom to participate in other blockchains without having to actually leave their current blockchain ecosystem. If all you have is Ethereum, but you want to participate in Bitcoin’s price movement, you can buy WBTC ERC 20 token and participate in Bitcoins movements without actually owning Bitcoin itself.  Because a huge portion of Defi ecosystem is based on the Ethereum system rather than Bitcoin. This can be a barrier for BTC owners who may not be able to participate in Defi programs.

In January 2019, when the WBTC.network was launched, plenty of Defi protocols — such as Dharma, MakerDAO, the Kyber Network, and Compound have allowed borrowers to buy and use WBTC for collateral in different DeFi programs. This can then be made into a smart contract, where crypto loans are paid out through other tokens.

Wrapped BTCs are the Future

With their versatility and benefits, more and more users will be inclined to make use of WBTC and wrapped coins in general. They not only close the gap between Bitcoin and Ethereum, but they also give you access to other cryptocurrencies across the whole market. Now BTC is not the only wrapped token, other tokens have been wrapped as well.

You can swap your Ethereum for WBTC on Sushiswap. Once converted, you can participate in DeFi protocols such as Compound.Finance in which you can lend it out and earn a decent yield.

There are other services in which you can lend or borrow WBTC, I just wanted to give a quick overview of what WBTC is and what a great innovation it is. Like I said, it is not the only Wrapped Coin out there and there are other “Wrapped BTCs” out there such as Binance coins BTCB in which Bitcoin is wrapped in the BEP2 protocol. The native Binance coin protocol.

Wrapping Coins is definitely the future and will allow a lot of flexibility in these markets.

That is it for now.  If you are interested in learning about how to invest and trade Cryptocurrencies please enroll in the course Blockchains Cryptocurrencies and Beyond at www.blockchainimmersive.com.  By enrolling, you will also get exclusive discounts to all future courses and exclusive content.  Hope to see you on the inside.