Wrapped Bitcoin (WBTC): Why It Matters

While decentralized finance (DeFi) may promise endless opportunities, some issues could stop it from achieving its aim of rivaling the current centralized economic system. One of these is the incompatibility of the premier cryptocurrency, Bitcoin, with major decentralized applications that make up the decentralized ecosystem.

This is where Wrapped Bitcoin (WBTC) comes in. The basic idea is to develop a digital currency that represents Bitcoin on the Ethereum blockchain. Read on to learn how it works.

What Is Wrapped Bitcoin (WBTC)?

Wrapped Bitcoin (WBTC) is an ERC-20 token with its value pegged to Bitcoin. This means that it’s a representation of Bitcoin that can operate on the Ethereum blockchain. It’s one of the most prominent wrapped tokens available in the DeFi ecosystem, due to Bitcoin’s reliability.

Assets are “wrapped” in order to be used on other blockchain networks where they can’t function. Just as astronauts need to be wrapped up in thick suits to be able to survive outside their natural habitat, Earth, one has to wrap BTC to make Bitcoin work on other blockchains.