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2024-01-25 07:17:30Wrapped Bitcoin is an ERC-20 token that is linked to BTC. It allows users to engage in decentralized applications (dapps) and decentralized finance (DeFi). Find out the specifics of how it operates.
Bitcoin was the first cryptocurrency ever created, and as such, it provides its users with a number of fantastic benefits. It has no central authority, is entirely transparent, and uses open source software. Nevertheless, it took place prior to the development of smart contract technology for its blockchain to be created. Because of this, it is now difficult for Bitcoin users to immediately take use of the most recent decentralized applications, often known as dapps.
Wrapped bitcoin, also known as wBTC, is a potential solution to this issue. It is Bitcoin that has been "wrapped" in Ethereum, which makes it compatible with the smart contracts that Ethereum uses.
To put it another way, WBTC is an Ethereum smart contract token that adheres to the ERC-20 standard and follows the price of Bitcoin. This means that WBTC may be bought with Bitcoin at a ratio of 1:1.
Key Takeaways
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The Bitcoin blockchain was designed specifically for use with the Bitcoin cryptocurrency. Wrapped Bitcoin is a token that operates on the Ethereum platform and has its value directly linked to that of Bitcoin.
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Wrapped bitcoin is an ERC-20 token that follows Bitcoin, which makes it simple for holders to benefit from the most recent decentralized applications (dapps).
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Wrapped Bitcoin also has a wide variety of applications inside the DeFi domain, such as yield farming.
What is the Difference Between Wrapped Bitcoin and Bitcoin?
Since the introduction of Bitcoin in 2009, blockchain technology has seen significant development. The development of "smart contracts," "Proof of Stake" (PoS) consensus methods, and other other advancements, amongst others, have ushered in an era of fresh opportunities for blockchain technology. However, Bitcoin owners are out in the cold when it comes to the most recent DeFi and GameFi programs since Bitcoin does not support interoperability.
Wrapped bitcoin was developed as a solution to this problem. It provides bitcoin owners with a mechanism to utilize their money on the Ethereum blockchain, which is home to more than 3,000 decentralized applications (dapps). Therefore, wrapped bitcoin aims to provide the same level of value as Bitcoin while also providing the flexibility of a token based on Ethereum.
Bitcoin
The Bitcoin blockchain is the decentralized ledger that is unique to Bitcoin, which is the biggest cryptocurrency in terms of market capitalization. Bitcoin's value has been volatile ever since the digital currency was introduced in 2009, but it has remained the most widely used digital money. Even large corporations like Starbucks and PayPal have begun to accept Bitcoin as a form of payment. On the other hand, decentralized applications (dapps) are difficult to implement using Bitcoin's blockchain since it does not support smart contracts.
Wrapped Bitcoin
Wrapped Bitcoin, on the other hand, is a kind of digital money that was developed specifically for use with the Ethereum blockchain right from the start. Wrapped bitcoin allows users to exchange their Bitcoin for the ERC-20 token standard known as wBTC. This allows wBTC to monitor the price of Bitcoin while also benefiting from the benefits of the Ethereum network.
This enables holders of BTC to more readily take advantage of the most recent chances offered by DeFi. Wrapped Bitcoin was first created by BitGo, Ren, and Kyber, but it is currently maintained by the wBTC DAO (decentralized autonomous organisation), which is an organization with over 30 members. On the other hand, Wrapped bitcoin is governed by an organization, although a decentralized autonomous organization (DAO), in contrast to Bitcoin, a cryptocurrency that operates without any centralized authority.
How Does Wrapped Bitcoin Work?
On the Crypto.com Exchange, Bitcoin owners may trade their Bitcoin for a matching amount of wBTC at a 1:1 ratio. The mechanism behind Wrapped Bitcoin stores the Bitcoins in return for the wBTC that is produced. In order to ensure that there is a one-to-one correlation between wrapped bitcoin and bitcoin if a user wishes to convert their wrapped bitcoin back into bitcoin, the wBTC must be burnt.
What Can You Do With Wrapped Bitcoin?
Bitcoin is a crypto currency, meaning its applications are restricted to functioning as a medium of exchange and a storage facility for value. Bitcoins that have been wrapped provide increased functionality.
Wrapped bitcoin, which is an ERC-20 token, may be used for a wide number of purposes, including the following:
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Provides Liquidity to DEXs: Bitcoin holders now have the chance to simply offer liquidity to decentralized exchanges (DEXs) and enjoy the advantages of doing so thanks to the addition of WBTC to the Bitcoin ecosystem. Popular decentralized exchanges (DEXs) like Uniswap and VVS are two examples of exchanges that may be accessed straight from the Crypto.com DeFi Wallet.
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Yield Farming: There has been a proliferation of DeFi lending services in the cryptocurrency market over the course of the last several years. wBTC holders are able to participate in various liquidity pools and receive profits on their investments. Tectonic is a prime example of a lending platform natively connected with the Cronos ecosystem.
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Borrows Against wBTC: If you are interested in obtaining a cryptocurrency loan, you may use wBTC as collateral on cryptocurrency exchanges located in your country that provide lending services.
Conclusion
wBTC is an excellent option to consider using if you are someone who believes in Bitcoin but also want to benefit from the most recent developments in dapps and DeFi chances. You can watch the price of Bitcoin while enjoying the functionality of wBTC's smart contracts because its value is connected to Bitcoin.
Within minutes, you'll be able to convert your Bitcoins into Litecoins if you use the Crypto.com Exchange. Learn more by paying a visit to the Exchange.
That's all for today, see ya tomorrow
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