Wrapped Bitcoin (WBTC) is an ERC-20 token — backed 1:1 by Bitcoin (BTC) — affording holders the ability to use a tokenized equivalent of their favorite crypto-asset on the Ethereum (ETH) blockchain.
Thanks to the wonders of tokenization, BTC holders can deploy their digital gold to the fast-growing decentralized finance (DeFi) markets, earning themselves double-digit yields!
What Can You Do With WBTC?
In the DeFi market of today, users can utilize WBTC using several different strategies and decentralized applications (dApps).
From putting the asset to work as collateral for securing a crypto-backed loan to earning interest in decentralized lending pools, liquidity mining, and yield farm revenues, there is no lack of ways to utilize your WBTC!
Note: While yield farming is considered much riskier than simply lending your digital cryptocurrency assets out, the expected APY % is also much, much higher.
Turn Your BTC To WBTC & New Possibilities Emerge
For example, Bitcoin HODLers friendly with the Ether blockchain can use WBTC as collateral to take out crypto-backed loans to use for their business or deploying leveraged crypto investment strategies.
Conversely, DeFi users can deposit their funds in a decentralized lending protocol as a liquidity supplier to earn interest!
And for those WBTC holders who are comfortable taking on more risk, they can deposit WBTC in liquidity pools to earn fees and liquidity mining rewards (typically in the form of protocol tokens).
Experienced traders can also use WBTC to margin trade on decentralized derivatives trading platforms.
Instead of depositing to a centralized derivatives exchange, traders can deploy WBTC on non-custodial derivatives trading applications to enhance their fund security while trading!
Is Wrapped BTC “Real” Bitcoin?
Wrapped Bitcoin is not Bitcoin.
WBTC is technically not real Bitcoin because WBTC is an ERC20 token operating on the Ethereum blockchain. While it is backed 1:1 by BTC through the ERC-20 token minting mechanism, you are technically not holding *actual* bitcoin when you have WBTC.
Today, WBTC has a market capitalization of over $4.6 billion, making it one of the most valuable total market value capitalizations of the top digital asset.
The parabolic rise of WBTC is (likely) attributed to these two factors: the booming DeFi market and the epic Bitcoin rally of this year, with WBTC emerging as the market-leading, tokenized BTC asset, even briefly reaching the top ten by market capitalization in early January!
With a multitude of features otherwise not afforded to BTC holders, most notably, the ability to participate in the growing decentralized finance market to earn yield, DeFi users have been notably receptive to tokenized BTC as a result.
New to Swapfolio?
Are you overwhelmed by multiple tabs and portfolio trackers?
If you are struggling to manage your Uniswap tokens – as always, we have got you covered.
Give Swapfolio a try today – for free!