{"id":10499,"date":"2023-01-26T09:20:25","date_gmt":"2023-01-26T09:20:25","guid":{"rendered":"https:\/\/www.bitnovo.com\/blog\/?p=10499"},"modified":"2025-09-10T15:22:59","modified_gmt":"2025-09-10T15:22:59","slug":"what-is-wrapped-bitcoin","status":"publish","type":"post","link":"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin","title":{"rendered":"What is Wrapped Bitcoin?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Alternar tabla de contenidos\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#what_is_wbtc\" >What is WBTC?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#wbtc_dao\" >WBTC DAO<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#what_is_the_role_of_traders_and_custodians\" >What is the role of traders and custodians?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#pros_and_cons_of_wrapped_bitcoin\" >Pros and Cons of Wrapped Bitcoin<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#advantages\" >Advantages<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#disadvantages_and_risks\" >Disadvantages and risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#possible_sidechain\" >Possible sidechain<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-wrapped-bitcoin\/#what_can_we_learn_about_the_success_of_wbtc\" >What can we learn about the success of WBTC?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span><p>The demand for\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-defi-o-decentralized-finance\/\">DeFi<\/a>\u00a0transcends any\u00a0<strong><a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/\">smart contract<\/a>\u00a0platform like\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-ethereum-eth-and-how-does-it-work\/\">Ethereum<\/a><\/strong>. In this article we will look at how that demand has materialized in<strong>\u00a0Wrapped Bitcoin<\/strong>\u00a0(WBTC) to provide\u00a0<strong>DeFi t<\/strong>o the\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-bitcoin\/\">leading cryptocurrency.<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>Next we will see what is WBTC, what are its advantages, disadvantages and its incredible success in Ethereum.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"what_is_wbtc\"><\/span><strong>What is WBTC?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p><strong>Wrapped Bitcoin is an Ethereum\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-an-erc-20-token\/\">ERC-20\u00a0<\/a><\/strong>token that maintains a\u00a0<strong>1:1 parity with Bitcoin<\/strong>. In other words, it is\u00a0<strong>Bitcoin\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-tokenization-or-tokenization-process-quick-guide\/\">tokenized<\/a><\/strong>\u00a0in Ethereum. It achieves this with a\u00a0<strong>centralized mode<\/strong>l in which a\u00a0<strong>custodian makes sure<\/strong>\u00a0to back each WBTC with a BTC.<\/p>\n<p>&nbsp;<\/p>\n<p>To obtain WBTC, and to retrieve the BTC, users have to go through an\u00a0<strong>identification process<\/strong>\u00a0due to\u00a0<strong>KYC\/AML regulation<\/strong>. However, there are also other platforms such as Curve where you can buy it in a decentralized way. Once you have the token, it can be used freely on Ethereum.<\/p>\n<p>&nbsp;<\/p>\n<p>The most popular use of WBTC is to\u00a0<strong>get profitability out of your bitcoin<\/strong>, using it in the wider DeFi ecosystem built on Ethereum.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_884612792\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img fetchpriority=\"high\" decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2.jpg\" sizes=\"(max-width: 768px) 100vw, 768px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2-300x205.jpg 300w\" alt=\"\" width=\"768\" height=\"526\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2-300x205.jpg 300w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin2.jpg\" data-sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"wbtc_dao\"><\/span><strong>WBTC DAO<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>To\u00a0<strong>decentralize control<\/strong>\u00a0over the Wrapped Bitcoin system, a\u00a0<strong><a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-dao\/\">Decentralized Autonomous Organization<\/a>\u00a0(DAO)<\/strong>\u00a0is used. Each DAO participant maintains a<strong>\u00a0secret key with which it can sign and authorize changes<\/strong>. Changes become effective if a number of N signers (out of a total of M) authorize them. This is known as a\u00a0<strong><a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-multi-signature-wallet\/\">multi-signature<\/a>\u00a0scheme.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>The DAO can vote on\u00a0<strong>changes to smart contracts and participating institutions<\/strong>. If, for example, a Bitcoin custodian fails to perform its duty, the DAO can remove it from the protocol.<\/p>\n<p>&nbsp;<\/p>\n<p>Below we will take a closer look at the roles of the financial institutions participating in Wrapped Bitcoin.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"what_is_the_role_of_traders_and_custodians\"><\/span><b>What is the role of traders and custodians?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p><strong>Merchants are the institutions<\/strong>\u00a0that\u00a0<strong>intermediate between users and custodians<\/strong>. When a user asks to exchange BTC for WBTC (and identifies himself), the merchant initiates an Ethereum transaction\u00a0<strong>to create WBTC.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>The merchant sends the specific amount of BTC to the custodian and the custodian finalizes the Ethereum transaction, creating that same amount of WBTC. These tokens will now be held by the merchant who will be responsible for sending them to the user (in exchange for bitcoin).<\/p>\n<p>&nbsp;<\/p>\n<p>Both merchants and custodians take a\u00a0<strong>BTC commission for their services<\/strong>. But once with WBTC on Ethereum, the only commission paid is\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-are-network-fees\/\"><strong>the mining<\/strong><\/a>\u00a0commission.<\/p>\n<p>&nbsp;<\/p>\n<p>Once you want to exchange WBTC for BTC, you will repeat the same process but \u201cburning\u201d or<strong>\u00a0destroying the WBTC token.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>To provide<strong>\u00a0transparency<\/strong>, the Bitcoin custodian uses\u00a0<strong>Proof of Reserves<\/strong>. Proof of Reserves is a concept popularized by\u00a0<strong>Nic Carter<\/strong>\u00a0that consists of\u00a0<strong>cryptographically proving the holding of cryptocurrencies<\/strong>. This avoids\u00a0<strong>fractional reserve<\/strong>\u00a0practices (holding less money than you owe).<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_470066123\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1.jpg\" sizes=\"(max-width: 768px) 100vw, 768px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1-300x205.jpg 300w\" alt=\"\" width=\"768\" height=\"526\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1-300x205.jpg 300w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/08\/Que-es-Wrapped-Bitcoin1.jpg\" data-sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"pros_and_cons_of_wrapped_bitcoin\"><\/span><strong>Pros and Cons of Wrapped Bitcoin<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>Let\u2019s see what are the advantages and disadvantages of using Wrapped Bitcoin:<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"advantages\"><\/span><strong>Advantages<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<ul>\n<li><strong>Faster transactions<\/strong>\u00a0than Bitcoin (on Ethereum).<\/li>\n<li><strong>Transactions without intermediaries.<\/strong><\/li>\n<li>Control of your own\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-bitcoin-wallet-is\/\">private keys<\/a>, although when it comes down to it, the BTC is not under your control.<\/li>\n<li><strong>Usability. The ERC-20\u00a0<\/strong>standard is widely implemented in wallets and decentralized applications.<\/li>\n<li><strong>Transparency.\u00a0<\/strong>We can see how much WBTC exists in Ethereum, the transactions being made, etc.<\/li>\n<\/ul>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"disadvantages_and_risks\"><\/span><strong>Disadvantages and risks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<ul>\n<li>It requires<strong>\u00a0trust in third parties<\/strong>. By having Wrapped Bitcoin you only have the\u00a0<strong>promise of being able to exchange<\/strong>\u00a0it for the same amount of BTC. Therefore it requires trust in the custodian and merchants.<\/li>\n<li><strong>High Ethereum commissions.\u00a0<\/strong>As is known, Ethereum usually has high commissions that can worsen the user experience.<\/li>\n<li><strong>Regulation.\u00a0<\/strong>As a centralized system, with a\u00a0<strong>consortium of financial institutions<\/strong>, they are susceptible to regulation (or even prohibitions). Merchants also maintain\u00a0<strong>private user information<\/strong>. This does not occur in a fully decentralized system..<\/li>\n<li><strong>Smart contracts.\u00a0<\/strong>Ethereum smart contracts, being more complex, are\u00a0<strong>susceptible to attacks<\/strong>. In addition the DAO could vote on a change to the contracts that would be detrimental to users.<\/li>\n<\/ul>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"possible_sidechain\"><\/span><strong>Possible sidechain<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>One possible\u00a0<strong>solution to Ethereum\u2019s scalability and fees<\/strong>\u00a0for WBTC would be the use of a\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-sidechain\/\">sidechain<\/a>. As outlined in Wrapped Bitcoin\u2019s own whitepaper, a sidechain could be created based on\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-proof-of-authority\/\">Proof of Authority<\/a>, and which requires\u00a0<strong>more trust<\/strong>\u00a0as it is federated.<\/p>\n<p>&nbsp;<\/p>\n<p>The upside of this would be<strong>\u00a0minimal commissions and much faster transaction speeds<\/strong>. But of course, at the cost of even more reliance on third parties.<\/p>\n<p>A better solution may be the use of\u00a0<strong>optimistic<\/strong>\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-are-rollups-ethereums-scalability-solution\/\">Rollups<\/a>, for the time being, and in the future of\u00a0<strong>ZK-Rollups.<\/strong><\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"what_can_we_learn_about_the_success_of_wbtc\"><\/span><strong>What can we learn about the success of WBTC?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>In closing, I find the success of Wrapped Bitcoin very telling. At the time of writing we are talking about\u00a0<strong>almost 200,000 WBTC<\/strong>\u00a0in circulation, or about\u00a0<strong>$9 billion.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>This means that<strong>\u00a0for every 105 bitcoins, 1 is tokenized in Ethereum. It is clear that DeFi is in high demand for Bitcoin.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>With these figures one can imagine that, the moment it becomes more accessible, DeFi (truly decentralized) for Bitcoin will be a resounding success.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span>The demand for\u00a0DeFi\u00a0transcends any\u00a0smart contract\u00a0platform like\u00a0Ethereum. In this article we will look at how that demand has materialized in\u00a0Wrapped Bitcoin\u00a0(WBTC) to provide\u00a0DeFi to the\u00a0leading cryptocurrency. &nbsp; Next we will see what is WBTC, what are its advantages, disadvantages and its incredible success in Ethereum. What is WBTC? Wrapped Bitcoin is an Ethereum\u00a0ERC-20\u00a0token that maintains a\u00a01:1 [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":7588,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[165],"tags":[],"class_list":["post-10499","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrencies"],"_links":{"self":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/comments?post=10499"}],"version-history":[{"count":2,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10499\/revisions"}],"predecessor-version":[{"id":24651,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10499\/revisions\/24651"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media\/7588"}],"wp:attachment":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media?parent=10499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/categories?post=10499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/tags?post=10499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}