Wrapped Bitcoin

• Wrapped Bitcoin (WBTC) is an ERC-20 token representing Bitcoin on the Ethereum blockchain.

• Allows Bitcoin holders to participate in Ethereum's DeFi ecosystem without selling BTC.

• WBTC is backed 1:1 by Bitcoin, enabling users to deposit BTC and receive WBTC for use in Ethereum.

• Facilitates the reverse conversion from WBTC back to BTC.

• 1:1 backing by Bitcoin, with each WBTC directly correlated to an equivalent amount of BTC held by custodians.

• The circulating supply of WBTC is 157,914 tokens, mirroring the amount of BTC wrapped.

As of today #{today’s date}, the price of Wrapped Bitcoin is ₹91,25,359.26 INR or 97911.58 USD, with a 24-hour trading volume of 343773612.16 USD. The market capitalisation for Wrapped Bitcoin is 13018007416.17USD. The circulating supply is 133015.92 Wrapped Bitcoin, with the total supply also being 133015.92 Wrapped Bitcoin.

Pros:

• Liquidity:

• WBTC brings Bitcoin’s liquidity to Ethereum’s DeFi ecosystem, allowing for more fluid exchanges and financial activities.

• Interoperability:

• It bridges two of the largest crypto ecosystems, enabling Bitcoin holders to participate in Ethereum-based applications without selling their BTC.

• Transparency:

• The WBTC network provides transparency through verifiable proof of reserves, ensuring that an equivalent amount of BTC backs each WBTC.

Cons:

• Centralisation Risks:

• The need for custodians to hold the BTC backing WBTC introduces centralisation, a potential security risk.

• Smart Contract Vulnerabilities:

• Being an ERC-20 token, WBTC is subject to the inherent risks of smart contract vulnerabilities on the Ethereum blockchain.

• Provides Bitcoin holders access to Ethereum’s DeFi space without liquidating BTC.

• Exposure to DeFi applications such as lending, borrowing, and yield farming offers potential additional income.

• Merges Bitcoin's liquidity and value with Ethereum's DeFi ecosystem flexibility.

• Offers interoperability and liquidity solutions between Bitcoin and Ethereum blockchains.

• Solves liquidity and interoperability issues between Bitcoin and Ethereum.

• Expands Bitcoin use cases into Ethereum’s DeFi ecosystem, enhancing DeFi with Bitcoin’s liquidity.

• Launched by BitGo, Kyber Network, and Ren in January 2019.

• BitGo is a digital asset trust and security company; Kyber Network and Ren focus on liquidity and interoperability within Ethereum.

• No traditional ICO; WBTC minting is based on BTC deposits, maintaining a 1:1 backing with Bitcoin.

• Market Risk: The value of WBTC is directly tied to the price of Bitcoin, which is highly volatile.

• Custodial Risk: The reliance on custodians to hold the Bitcoin backing WBTC introduces centralisation and custody risks.

• Regulatory Risk: Changes in cryptocurrency regulations could impact the operation and acceptance of WBTC.

The Wrapped Tokens Whitepaper proposes a framework for issuing asset-backed tokens, which are tokens that reflect the price of the asset backing them. The paper focuses on wrapped tokens, which follow a centralised model but rely on a consortium of institutions performing different roles in the network. The first wrapped token launched is an ERC20 token backed by Bitcoin (BTC) called Wrapped BTC (WBTC). WBTC is fully accounted for, and proof of reserves is posted on the BTC chain. The paper discusses tokenisation's benefits, including increased transaction speed, reduced intermediaries, enhanced security, usability, and transparency. Wrapped tokens can bridge the gap between BTC and ETH, providing more liquidity on decentralised exchanges and other decentralised applications/protocols. Fiat currency-backed tokens offer a safe way for traders to keep their money in a cryptocurrency without worrying about price fluctuations. Wrapped tokens can also enforce policies on-chain, making rules more transparent and not relying on one party to implement them. The paper addresses scalability, trust, regulation, and governance challenges and proposes a multi-institutional framework for tokenising assets. The framework involves custodians, merchants, users, and WBTC DAO members. Custodians hold the keys to mint tokens, merchants initiate the minting of new wrapped tokens and burning of wrapped tokens, users can use wrapped tokens to transfer and transact, and WBTC DAO members control contract changes and addition/removal of custodians and merchants. The paper also proposes a side chain for wrapped tokens to increase transactional throughput and scalability. Atomic swaps can be used between merchants and users to exchange WBTC and BTC. The paper concludes that wrapped tokens provide a solution to make assets interchangeable and representable on the Ethereum chain, enabling Dapps to access Bitcoin easily.