Wrapped Bitcoin, often abbreviated as WBTC, is a tokenized representation of Bitcoin on a different blockchain network, typically Ethereum. It allows Bitcoin holders to utilize their assets within decentralized finance (DeFi) applications that operate on other smart contract platforms. Each WBTC token is backed 1:1 by actual Bitcoin held in reserves, managed by a custodian. This mechanism facilitates interoperability, extending Bitcoin’s utility beyond its native chain.
Context
Wrapped Bitcoin plays a significant role in bridging the liquidity of Bitcoin with the functionality of other blockchain ecosystems, particularly within the decentralized finance sector. Its adoption highlights the demand for cross-chain compatibility and the ability to deploy Bitcoin capital in various DeFi protocols. Key discussions often revolve around the security and transparency of the custodial process that underpins WBTC, which remains a central point for trust in its operation.
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