Conversely, WBTC holders can deposit their funds in a decentralized lending protocol as a liquidity supplier to earn interest. On Compound and Aave, for example, WBTC depositors currently earn 0.09% and 0.02% APY, respectively. Today, WBTC has a market concern mounts over potential crypto exchange wex exit scam capitalization of over $4.6 billion, making it one of the largest digital assets by total market value. To tokenize BTC into WBTC, bitcoin holders need to use “merchants,” such as AirSwap or WBTC.cafe and their BTC will be held by a custodian.
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. Wrapped Bitcoin, on the other hand, is a cryptocurrency that’s designed for the Ethereum blockchain from the ground up. Wrapped bitcoin gives users the ability to trade their BTC for the ERC-20 token standard wBTC, which tracks BTC’s price but gains the advantages of the Ethereum blockchain. This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi.
But putting the rivalry between Bitcoiners and Ethereans aside, the fact is that the overall value of Bitcoin still dwarfs Ethereum. However, with all that largess and brand name recognition, little has changed in Bitcoin’s development since its creation over a decade ago. Sure, their dedicated developers have tweaked and upgraded it, but it’s still pretty standard compared to what’s happening across the aisle.
A large chunk of the DeFi ecosystem are based on the Ethereum network rather than the Bitcoin blockchain. This can be extremely frustrating for BTC owners, as this means it’s near impossible for them to get involved unless they sell their crypto assets or buy others. Bitcoin is the world’s largest cryptocurrency by market capitalisation and native to the Bitcoin blockchain. Since its dxfeed to launch chainlink node to bring financial launch in 2009, Bitcoin’s value has fluctuated, but it has consistently been the most popular cryptocurrency, even finding acceptance by major companies like Starbucks and PayPal. However, since the Bitcoin blockchain lacks smart contract integration, it can’t easily be used in dapps. Depending on the target network, Bitcoin could be wrapped into other token standards as well.
The value of a pegged token or currency can be linked to that of another asset — digital or physical — using a variety of approaches. Because custodians link wrapped tokens to the value of other crypto assets, they fall under the pegged currency classification. Most of the current implementations of wrapped tokens require trust in the custodian holding the funds. bitcoin bloodbath sees cryptocurrency markets tumble As for the currently available technology, wrapped tokens can’t be used for true cross-chain transactions – they usually need to go through a custodian. Another significant advantage wBTC brings to the market is greater liquidity. This distribution of funds can create a scenario where DEXs and other platforms lack the necessary liquidity to function optimally.
- Binance – Buy over 350 tokens in seconds with fees as low as 0% 0% FEES Spot, futures, options, NFTs, savings, staking, and Binance Card.
- All told, there is 143,843 wrapped FIL on Ethereum, or more than $3 million USD.
- Therefore, just like Bitcoin, Ether needs to be wrapped to comply with other ERC-20 token standards.
- Let’s face it, the major blockchain innovations are happening over on Ethereum.
- Both wBTC and renBTC allow Bitcoin owners to interact with Ethereum-based DEFI protocols.
BTCB is one of the fastest-growing tokenized bitcoin tokens, operating on Binance Chain as a BEP2 token and on Binance Smart Chain as a BEP20 token. At the time of writing, BTCB has a market capitalization of over $200 million, boosted by its popularity as a leading pegged coin in the growing DeFi ecosystem on Binance Smart Chain. Forbes makes no representations or warranties about the accuracy or completeness of the Content. Forbes does not warrant that the Content will be uninterrupted, undelayed or error free.
What Is Wrapped Bitcoin (WBTC)?
The technical specifications of wrapped crypto tokens showcase that wrapped BTC tokens are inherently safe. Even if the WBTC remains in control of platforms such as Binance Smart Chain or Ethereum, users will have the benefit of safety of the platforms. Another significant application of wrapped BTC in the domain of DeFi would deal with yield farming. Yield farming basically refers to a DeFi protocol with considerable differences from staking, such as the shorter lockup periods.
A centralized custodial bridge that holds Bitcoin is an organization that promises to mint ERC-20 tokens on Ethereum, for example. The centralized entity must be trusted that they will hold the BTC and not run away with it. Users must ensure these organizations are at least backed up by guarantees and insurances in case something goes wrong. Wrapped crypto tokens are cryptocurrencies pegged to the value of another original crypto or assets like gold, stocks, shares, and real estate and put to work on the DeFi platforms. Of course, one can expect wrapping and bridging technology to improve, and security to also strengthen.
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The applications of WBTC in yield farming protocols such as Compound strengthens the case for the future of these wrapped cryptocurrency tokens. Different renowned DeFi apps on Ethereum demand collateral for offering their services. For example, popular DeFi solutions such as Compound and MakerDAO emphasize the need for locking up crypto assets to access lending services. Wrapped Bitcoin alongside other wrapped crypto tokens has been garnering attention in the crypto landscape. Blockchains, the underlying technology behind Bitcoin and Ethereum, come in the form of different protocols.
With trading volumes increasing, ensuring transactions can be executed quickly without significant price fluctuations matters. Wrapped bitcoin was created to rectify this situation by offering a way for bitcoin holders to use their cryptocurrency on the Ethereum blockchain, home to over 3,000 dapps. Thus, wrapped bitcoin aims to offer the value of Bitcoin along with the flexibility of an Ethereum-based token. As the first-ever cryptocurrency, Bitcoin offers users some incredible advantages. However, its blockchain was established before the advent of smart contract technology. This has made it impossible for Bitcoin users to directly enjoy the latest decentralised apps, or dapps.