What Is Wrapped Bitcoin? Should You Invest?

wBTC

Wrapped Bitcoin or wBTC is an ERC-20 token that represents Bitcoin on the Ethereum blockchain. WBTC integrates into the world of Ethereum wallets, smart contracts, and dapps.

With the help of a wBTC partner, you can convert 1 Bitcoin to 1 Wrapped Bitcoin, and vice-versa. It was created to allow Bitcoin holders to participate in decentralized finance(DeFi) apps on the Ethereum blockchain.

The BTC that backs wBTC is transparently verifiable through the system of proof of reserve. Wrapped Bitcoin is a 1:1 representation of Bitcoin. WBTC DAO is a group that maintains the wBTC, and it now consists of over 30 members. BitGo, Ren, and Kyber originally started the concept of wrapped cryptocurrencies. 

WBTC vs BTC: What’s The Difference?

  • Wrapped Bitcoin is just a tokenized version of Bitcoin. The purpose is to allow Bitcoin to be used in the Ethereum DeFi ecosystem.
  • To mint your wBTC token, you will require trusted merchants(like Kyber, Airswap, or DeversiFi) to hold your BTC. And in exchange, the merchant will issue you your WBTC tokens compatible with Ethereum.
  • Wrapped Bitcoin has more user functionality compared to regular BTC, as it can leverage Ethereum’s robust smart contracts.

Why Is It Important?

  • The wrapped bitcoin is so important as it mirrors the value of a bitcoin with the improved functionality and high transaction speed of the Ethereum network.
  • Wrapped cryptocurrencies have improved the cross-chain flow of assets, improved liquidity, and eventually benefitted Ethereum’s DeFi network.
  • They have enhanced the interconnection between blockchain ecosystems. And due to this, many new composability and collaborations have been possible.

Should you Invest?

If you believe and invest in Bitcoin, you can invest in wBTC too. The price of 1 wBTC stands equal to 1 BTC, but there is always some difference. According to Coinmarketcap, wBTC was available at a 1.8% discount. If you can buy wrapped bitcoin at a discounted bitcoin price, you can book a lot of profit when the value of Bitcoin increases.

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