Understanding WBTC: Overview, Use Cases, and Market Potential
Nobody can deny that Bitcoin is the most valuable and popular cryptocurrency. But under the hood, this asset is only a payment method and lacks advanced blockchain features like smart contract support. Experts looked for a way to bridge the gap and make BTC usable on other chains, along with the option to utilize it in dApps.
The answer was creating a stablecoin called Wrapped Bitcoin on Ethereum. You can check the FTM to WBTC calculator to learn more about its value compared to Fantom, one of the so-called Ethereum killers. In this guide, our experts discuss Wrapped Bitcoin in more detail.
What Is Wrapped Bitcoin (WBTC)?
Wrapped Bitcoin is a stablecoin, a crypto asset that looks to replicate the value of its underlying asset. WBTC uses Bitcoin as the base currency. So, if you know the current worth of BTC, that’s how much a single WBTC will cost, too. For some other currencies, you’d have to read the Jasmy price prediction and similar articles.
The creators designed a network of custodians and merchants that feature automatic monitoring to preserve WBTC liquidity. The network uses actual BTC as a backing mechanism, pursuing the 1:1 ratio of the underlying asset. This means there’s a Bitcoin in reserve for every WBTC in circulation, and that’s the stablecoin’s top priority to maintain.
WBTC is an ERC-20 token available on the Ethereum blockchain. Once there’s a Bitcoin ready for conversion, a custodian mints and burns ETH-based coins. From a user’s perspective, the trade begins by initiating the process via an exchange. The merchant receives the funds after the mining, and users acquire the asset to do as they please. If the investor converts WBTC back to Bitcoin, a burning transaction destroys the funds.
The Role of WBTC in the DeFi Ecosystem
Three entities joined power to establish the Wrapped Bitcoin. The major player is BitGo, which is a company specializing in providing financial services for digital assets, such as lending or borrowing funds. The other two are Kyber Network and Ren, which focus on cross-platform integration between different blockchains.
That brings us to the key role of Wrapped Bitcoin, which is interacting with decentralized finance protocols on Ethereum. Developers can integrate WBTC in their dApps on this blockchain, providing the option to use a BTC variation to make in-app purchases. Wrapped Bitcoin also has other use cases in DeFi, including staking, lending, and liquidity provision. You can stake WBTC to earn interest from the deal or do the same on lending platforms.
The currency adds versatility to Bitcoin and ensures it goes beyond serving as only a crypto payment method. It’s important from the perspective of service providers, too. Wallets, exchanges, and other tools compatible with Ethereum don’t need to design separate ETH and BTC networks just to offer Bitcoin. Instead, they can now have only an Ethereum mode while offering the benefits of a currency similar to BTC.
WBTC Market Overview
Wrapped Bitcoin has a market cap of around $9.36 million, with its trading volume varying at about 1-2% per 24 hours from this cap lately. You can currently find 150,544 WBTC coins in circulation, indicating that this currency has that number of BTC reserves. That shows its liquidity is at a high level, which contributes to the token’s reliability.
WBTC has a direct peg to Bitcoin, meaning that it replicates its price. The result is that the token’s current worth is around $62,000, and WBTC also had its all-time high in March 2024. The last 12 months have been positive for Bitcoin, and as long as that currency performs well in the market, WBTC will follow.
The Future of WBTC in Bridging Bitcoin With DeFi
Wrapped Bitcoin is a stablecoin with unique features that can prove particularly important to users. For a long time, users on the Ethereum network have been complaining that they don’t have the option to use BTC there.
WBTC is the currency that bridged that gap. It increased Bitcoin’s versatility and unlocked it for decentralized finance opportunities on the Ethereum blockchain. Considering its peg to the most valuable cryptocurrency out there, there’s no doubt that the future growth of WBTC will continue, providing that Bitcoin keeps performing well.
