Wrapped Bitcoin is a tokenized version of Bitcoin (BTC) that runs on the Ethereum (ETH) blockchain.

WBTC is compliant with ERC-20 — the basic compatibility standard of the Ethereum blockchain — allowing it to be fully integrated into the latter’s ecosystem of decentralized exchanges, crypto lending services, prediction markets and other ERC-20-enabled decentralized finance (DeFi) applications.

WBTC is also backed by Bitcoin at a 1:1 ratio via a network of automatically monitored merchants and custodians, ensuring that its price is pegged to Bitcoin at all times and allows users to transfer liquidity between the BTC and the ETH networks in a decentralized and autonomous manner.

Wrapped Bitcoin was first announced on October 26, 2018, and officially launched on January 31, 2019.

## How Are Wrapped Bitcoin Created?

The creation of Wrapped Bitcoin brings the world's leading cryptocurrency Bitcoin into the world of Ethereum's DeFi ecosystem. The WBTC token adheres to the ERC-20 token standard, with tokens created for those who want to convert BTC into WBTC.

All to-be-converted BTC is held by a custodian, who takes part in the actual minting and burning of Ethereum-based tokens. When WBTCs are burned, the user can reclaim their BTC balance from the custodian. During mining, users send BTC to the custodian for storage and receive an equivalent in WBTC tokens. BitGo is the biggest custodian for Wrapped Bitcoin, and they will mine a certain number of WBTC and send them to the merchant's Ethereum address.

The user who wants to swap between wBTC and BTC performs a trade — through a centralized exchange or atomic swap on a decentralized exchange — to move funds to the merchant. Once finalized, the user can use their BTC/wBTC as they see fit. If WBTC is converted to BTC, the associated Wrapped Bitcoin balance will be destroyed through a burn transaction.

The WBTC DAO consists of governing members who decide on significant upgrades and changes to the protocol. Additionally, these members can serve as merchants or custodians managing BTC assets.


## What Can You Do With WBTC?

As Wrapped Bitcoin tokens adhere to the ERC-20 token standard, one can use them across the broader Ethereum ecosystem. That includes trading them on decentralized exchanges — like Uniswap, 1Inch, Sushiswap — and exploring decentralized finance opportunities through protocols and platforms supporting WBTC.

DeFi opportunities for WBTC range from lending and borrowing to yield farming, token swapping and liquidity pools. Various protocols and platforms support Wrapped Bitcoin, including Aave, Balancer, Compound, MakerDAO. Some of these providers may issue platform-native governance tokens as an extra incentive.

Using WBTC as colateral for a crypto-backed loan can be a significant option for businesses. Additionally WBTC holders can earn interest from supplying liquidity, although the APY will be relatively low.

Another option for WBTC is to engage in margin trading, where Wrapped Bitcoin is used to margin trade Ethereum, stablecoins and other ERC-20 tokens. Users deploy WBTC to enhance fund security while trading. That process is fully non-custodial and powered by smart contract technology.