As a bridge connecting the Ethereum and Bitcoin ecosystems, Wrapped Bitcoin (WBTC) is a tokenized form of Bitcoin on the Ethereum network. It has gained popularity in the DeFi market and allows Bitcoin to be used in a variety of DeFi applications.
In order to bring Bitcoin liquidity to the Ethereum ecosystem, Wrapped Bitcoin was first introduced in January 2019. Each WBTC token was designed as an ERC20 token with a 1:1 pegged value to Bitcoin, which is backed by an equivalent amount of Bitcoin that is kept in custody by a group of custodians.
Wrapped Bitcoin provides as a link between the Ethereum and Bitcoin ecosystems, enabling the use of Bitcoin in the smart contracts and decentralised applications (dApps) on the Ethereum blockchain. Without having to sell their actual Bitcoin holdings, users can now use Ethereum-based decentralised finance (DeFi) applications that require Bitcoin as collateral or for other purposes.
Numerous DeFi apps, including as yield farming, decentralised exchanges (DEXs), platforms for lending and borrowing, and other financial services on Ethereum, support WBTC. Beyond conventional Bitcoin transactions, it increases Bitcoin's liquidity and makes it possible for it to be used in a wider range of blockchain-based applications.
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