Wrapped Bitcoin (WBTC)
BTC on Ethereum blockchain — 1 WBTC = 1 BTC, useful in DeFi.
Wrapped Bitcoin (WBTC) is an ERC-20 token representing Bitcoin on the Ethereum blockchain — 1 WBTC is always backed by 1 real BTC.
How it works:
•Custodian (BitGo) holds real BTC
•Issues WBTC in equivalent amount on Ethereum
•User can always exchange WBTC → BTC (through approved merchant)
•Reserves are publicly verifiable on BTC blockchain
Why WBTC exists:
•Bitcoin blockchain doesn't support complex smart contracts
•WBTC brings Bitcoin liquidity to Ethereum DeFi ecosystem
•You can use BTC value in Aave, Uniswap, Compound
Risks:
•Centralized custody (BitGo) — you trust a third party with BTC
•Smart contract risk on Ethereum side
•2023: BitGo announced custodian change causing temporary panic
Alternatives:
•tBTC — decentralized wrapped Bitcoin (Threshold Network)
•renBTC — was popular, but Ren protocol discontinued
•cbBTC — Coinbase Wrapped Bitcoin (2024)