What is Wrapped Bitcoin (WBTC), and why was it created?
WBTC is a token built on the Ethereum blockchain and pegged to Bitcoin in the proportion of 1:1. The asset brings more liquidity and value both to BTC and ETH ecosystems.
How does WBTC work, and what's the process of wrapping Bitcoin?
WBTC works as an ERC-20 token, representing Bitcoin in the Ethereum ecosystem. To wrap Bitcoin and get WBTC, a custodian first lock BTC, mints the same amount on Ethereum, and ensures a 1:1 peg between them.
What's the advantage of using WBTC over Bitcoin on the Ethereum network?
The main advantage is that WBTC allows Bitcoin to be used in Ethereum ecosystem. It enables users to earn interest, provide liquidity, and access various DeFi services.
Is WBTC centralized due to the custodial process?
Although to create WBTC there's a need in custodians, it's governed by a consortium. Thus, the custodians regularly undergo audits to ensure transparency.
Where can I obtain WBTC?
You can obtain WBTC through such exchanges as Bybit, Kraken, Binance, and Coinbase.
Can I earn interest on my WBTC holdings?
Yep, it's possible. For that, use decetralised finance (DeFi) protocols like Aave or Compound.
What's the difference between WBTC and native Bitcoin on the Ethereum network?
WBTC is an ERC-20 token, which represents Bitcoin on the Ethereum blockchain. Native BTC on Ethereum has a ticker tBTC and is more decentralised. The main difference between them is that WBTC has greater liquidity and is more widely accepted in the decentralised finance (DeFi) sector.
Is WBTC's supply capped like Bitcoin's?
No, WBTC's supply is not capped. It can be minted or burned based on demand.
Can WBTC be used for everyday transactions on the Ethereum network?
Well, technically, it's possible, but WBTC is not commonly used for evreryday transactions. It's mainly employed in the sphere of decentralised finance (DeFi) activities.
What's the role of custodians in WBTC's ecosystem?
Custodians in WBTC's ecosystem mint and redeem WBTC. They hold and manage the Bitcoin collateral that backs WBTC, faciliating the interoperability between BTC and Ethereum blockchains.
Can I redeem WBTC for the underlying Bitcoin?
Yes, users can redeem WBTC for the underlying Bitcoin. All they need to do is to return the assets to custodians, who then will release the equivalent amount of BTC.
Is WBTC a stablecoin like USDC or USDT?
No, WBTC isn't a stablecoin. Its value isn't pegged to a fiat currency but to Bitcoin.
How does WBTC impact Ethereum's network congestion and gas fees?
WBTC transactions can increase Ethereum network congestion and gas fees by adding transactions, interacting with smart contracts, and participating in some DeFi activities. All those can raise fees.
What's the process of auditing WBTC reserves?
The process of auditing WBTC reserves involves verifying if the amout of Bitcoin held matches the total supply of the tokens. This is conducted by analysing custodial addresses, verifying trancations on the BTC blockchain, and potentially engaging independent auditors for assurance.
Is WBTC taxable like Bitcoin?
Yes, WBTC is taxable but it depends on the juristiction. In most of them, including the US, Bitcoin and WBTC are considered property rather than currency.
