Bitcoin has been and will long be the most popular cryptocurrency on the market. However, it was the first and was created solely as an alternative to fiat money. Later blockchains since Ethereum have more functionality. Based on Ethereum and its main competitors, smart contracts, decentralized applications, decentralized exchanges and other business infrastructure are being created.
Is it possible to use Bitcoin on the Ethereum blockchain? This idea was the impetus for the creation of Wrapped Bitcoin, and then other Wrapped coins.
What is Wrapped Bitcoin (WBTC)
You can use coins from one platform on another platform in many ways. The most obvious and simple is to exchange cryptocurrency for cryptocurrency. To do this, just visit Letsexchnage – crypto exchange online or use the services of a traditional trading platform.
But easier and better are not the same thing. Over time, the exchange rate will inevitably change, and it is not at all a fact that in your favor.
Wrapped Bitcoin (WBTC) is nothing more than a variety of stablecoins backed by existing BTC coins. Wrapped coins are the link between incompatible blockchains, just like a tokenized dollar links the world of fiat currencies and the blockchain. Technically, this is nothing more than an EPC-20 standard token, which makes it possible to use the functionality of the Ethereum blockchain.
Wrapped Bitcoin (WBTC) was created in 2019. It was created by a group of organizations interested in the possibility of using BTC in DeFi. The working group was organized by Ren, Kyber Network and BitGo.
What is the difference between WBTC vs BTC
Wrapped Bitcoin is designed to store and transfer the value of Bitcoin in the Ethereum DeFi ecosystem. The WBTC minting process involves trusted merchants who hold your coins in provable reserves and issue Ethereum compatible tokens.
The minting process looks like this. The customer contacts a trusted seller who is required to verify your identity and ownership of the coins. If there are no difficulties, the seller turns to the custodian (now this function is entrusted to BitGo). The custodian issues WBTC tokens in an amount equal to the declared amount of collateral in BTC, which are kept by the customer until that moment.
The custodian transfers the WBTC to the seller, and the seller performs the WBTC to BTC exchange.
The customer can now seamlessly use WBTC for DeFi transactions. BTC remain in reserve until the customer needs his original coins.
After the transition to WBTC, Bitcoin becomes an improved version of itself:
- Increased transaction processing speed. The throughput of the Ethereum blockchain is almost double that of the Bitcoin blockchain.
- The liquidity of the asset increases. Decentralized exchanges often use the Ethereum blockchain and are not available for the original BTC. After tokenization, the market expands at the expense of previously inaccessible decentralized platforms.
- It opens up the ability to create smart contracts with Bitcoins.
How are WBTC and BTC similar?
A dollar in cash, when deposited to a bank account or an account in an electronic payment system, does not become another currency. Economically, this is the same coin, but with different functionality.
The same applies to Wrapped BTC. It retains all the market characteristics of the original coin, but has more potential for practical applications.
Which is better: WBTC or BTC
Since they are economically the same coin, the best choice is the one that is optimal for your purposes.
The original is preferable as a long-term investment tool. A tokenized coin is much more convenient for doing business using smart contracts and trading on the DEX.
For more valuable information visit this website