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Wrapped Bitcoin: Easy guide to this ERC-20 token

wrapped bitcoin

As a cryptocurrency trader, understanding the requisite knowledge of what Wrapped Bitcoin (WBTC) means is highly essential. WBTC is an ERC-20 token that represents Bitcoin (BTC) on the Ethereum blockchain. WBTC creates network liquidity of BTC on the Ethereum network for traders, financial services/institutions, and decentralized applications. 

As wrapped Bitcoin represents Bitcoin, its main aim is to increase Bitcoin’s functionality and price value. It does this by connecting and combining to the Ethereum blockchain. A key advantage of WBTC is its integration into the world of Ethereum wallets, dapps, and smart contracts. Through a WBTC partner, 1 Bitcoin can be converted to 1 Wrapped Bitcoin, and vice-versa. 

The WBTC protocol holds about 1% of BTC supply. Aside from initiating liquidity in DefF, and being used as collateral, WBTC token also helps easy access to the Ethereum (ETH) interface for users; This is done through decentralized exchange token transactions across various blockchains. 

The wrapped Bitcoin innovation dates back to its formation in January 2019 to solve the problem of BTC to Ethereum network usage under the auspices of the decentralized autonomous organization (DAO). 

The WBTC DAO inadvertently led to users’ high conversion rate of $800 million Bitcoin to WBTC.

Wrapping Bitcoin is a sure way to gain massively as a cryptocurrency trader. Here’s all you need to know about Wrapped Bitcoin and how it works.

How do I buy Wrapped Bitcoin?

The innovation in January 2019 meant that a suitable Bitcoin holder should choose to buy WBTC tokens, as it remains one of the best investment advice to take; This is done on a 1 to 1 basis with loans and interests, as wrapped Bitcoin is an Ethereum-based token.

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Below is a non-arduous process of buying a WBTC:

1. Create an account 

You can create an account through a Bitcoin reserves purchasers and merchants account or site. Provide the necessary details, connect it to a bank account or debit card and fund it. 

You can achieve these with a WBTC cryptocurrency loan exchange or swap with Ethereum (ETH) tokens for WBTC through the DeFi ecosystem.

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2. Buy Wallet

A wallet keeps a tokenized version of crypto assets and secure funds. There are two types of crypto wallets; you can find the BTC and Ethereum wallets, depending on the crypto merchant platform you’re using. 

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Hardware Wallet

This type of crypto wallet allows you to keep your keys in an adequately secured device. Crypto coins can be stored offline with hardware wallets, making it difficult for hackers to gain access.

Software Wallet

A software wallet is a cryptocurrency application that is on your P.C.’s hard drive. It allows a user to be in complete control of your Ethereum and Bitcoin. DeFi applications you can trust for this purpose are Trust Wallet, MetaMask, Gnosis Safe, etc. 

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3. Purchase/Order

Here, you contact one of the crypto merchants in a centralized exchange system and tap on “mint” in the BTC wallet. Your WBTC will be purchased invariably at the fixed market price, except there’s a limit.

Note, it may take a while before you can get done with the whole process. A WBTC also has a minimum percentage rate of 0.025%.

What can I do with Wrapped Bitcoin WBTC?

The WBTC can be changed to Bitcoin and can also do smart contracts platforms, dApps games, decentralized exchanges (DEXs), and fund loaning through decentralized finance DeFi protocol eco-program. 

Here are a few other things you can achieve with a Wrapped Bitcoin WBTC

1. There are top-notch integrated settings on WBTC, giving it advantages over regular Bitcoin through new blockchain technologies. It helps for easy execution of agreements when the set criteria are met, otherwise known as a smart contract.

2. Bitcoin holders/traders can Leverage earnings and returns even with an insufficient fund or digital assets – This is possible by “margin trading,” which involves borrowing money from decentralized exchanges.

3. As collateral. Borrowers of cryptocurrency tokens will need to use collateral to secure their loans, unlike before when people paid in Ether. In recent times, most DeFi platforms are created at the top of the Ethereum blockchain.

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Kyber Network is an example of a protocol that allows using WBTC as collateral.

WBTCs are an excellent tool for experienced Bitcoin holders or traders because of their high-tech programming. The use has led to an increase in decentralized finance DeFi services. 

As a Bitcoin holder, you don’t have to liquidate your holdings for finance operations and their networking as it is safe and easy to use.

What are the Bitcoin models?

When it comes to trading in the crypto markets, the Peer-to-Peer (P2P) model is one of the oldest while making Bitcoin transactions.

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Peer-to-peer is a decentralized exchange model where two different individuals understand purchase and merchant goods and service; no third-party interference of a or incorporated entity in decentralized blockchain protocol such as Kyber Network does anything here. 

There are other different WBTC models and DeFi protocols that you can use to achieve similar results:

1. Centralized Platform 

A centralized platform enables you to wrap Bitcoins through its intermediary support system. Experts WBTC holders would subsequently contract, maintain, and store the Bitcoin on an ERC-20 token transaction basis.

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2. DeFi Ecosystem

Crypto (like mint WBTC) is usually stored in a smart DeFi ecosystem with your security code. It also holds the WBTC as Bitcoins. It is trustless and the most independently advanced wrapping system.

3. Synthetic network

Here, the equal total value of assets is given when Bitcoins are locked in a smart contract. This is secured with native tokens and synthetic DEX, and it also leads to an optimum increase in the amount of WBTC.

In all, achieving a WBTC is a secure and easy process. However, avoid the early Bitcoins trust-based models platforms and frequent centralized mint new tokens, third-party custodians, and ample Bitcoin storage to avoid fatal loss.

How do I wrap my Bitcoin?

This is a fundamental question as there are fake software platforms used to lock up Bitcoins. To be on the safer side, try using some of the centralized or Defi platforms that come highly recommended. That way, you’re sure that you transact from a secured space.

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  • Register on one of the Defi platforms
  • Tap on the “wrap Bitcoin button” in the Wallet after checking in.
  • Proceed to enter the amount of Bitcoin to be wrapped as required.
  • Tap on the “confirm wrap” button to continue and consummate the transaction.

The WBTC platform has a minimum and maximum amount of withdrawal as a security measure. This secures the Bitcoin blockchain when you’re either receiving and sending it to an external site. 

Depending on the crypto exchange or merchant, the minimum and maximum amount of wrapped coin transfer and withdrawal can fall between 0.0054 and 62.5.

How many confirmations are needed for WBTC?

Currently, WBTC network confirmation is 35.

How many WBTCs are there in circulation?

Wrapped Bitcoin’s current circulating supply is 190,000. It also has a total collection of 195,000 WBTC.

You can keep track of the exchange between WBTC and Bitcoin through the dashboard of the WBTC order book. This helps you see minting records on the Ethereum ecosystem and all transaction operations.

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Every crypto trader should know that WBTCs can release a massive amount of liquidity to the decentralized finance (DeFi) ecosystem.

Conclusion

The most important consideration of this initiative is transparency. The proof of reserve is on-chain, which shows the exact 1:1 between minted WBTC tokens and BTC stored by the custodians. When WBTC token holders redeem their tokens for BTC, the tokens are burned. The minting and burning of tokens are in turn tracked and verifiable on the blockchain. Wrapped Bitcoin delivers the power of Bitcoin with the flexibility of an ERC20 token backed 1:1 with Bitcoin 100% verifiable.

Shawn Du'Mmett

Shawn Du'Mmett

Former IT development and consultant, remote team and collaboration expert, PM, CCO, writer, dreamer, idealist looking to collaborate with global teams on a global teal/turquoise organisation. Shawn's dream is working together openly, to get what writers need and want, and to solve biggest global problems. He is building a collaboration system from the start that everyone can own and define, allowing them to work together, to decide how it works and to their highest ideals.

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