Popular Science | In less than a year, the market value of WBTC has grown from 4 million to 1.5 billion US dollars. What is it?

The concept of decentralized finance (DeFi) was proposed by the native community of virtual currencies. In essence, it enables users to perform transactions and other operations on their own when using financial services provided by blockchain technology without the help of traditional intermediaries.

However, since the concept was proposed, DeFi has gradually seen the emergence of various service forms such as infrastructure, payment and lending, derivatives and insurance, and is seen as a financial market with great potential.

As the foundation of the new financial ecosystem DeFi, Ethereum has attracted more and more Bitcoin. The total locked value of WBTC (Wrapped BTC), the first Bitcoin that uses the Ethereum token standard (ERC20 standard), is close to $1.5 billion, which is a huge flow of BTC from the Bitcoin network to the Ethereum ecosystem.

So, as the ERC-20 version of Bitcoin, WBTC has become one of the important solutions for DeFi and has a dominant advantage in the field of tokenized crypto assets. What is the secret behind it? Let us unveil the mystery of WBTC today.

01 What is WBTC

WBTC stands for Wrapped Bitcoin, which literally means "wrapped Bitcoin". It is an ERC-20 token based on Ethereum and pegged to Bitcoin .

Jointly launched by BitGo, Kyber Network, Ren and other blockchain projects, it was officially launched in January 2019. The token is issued on Ethereum and is 1:1 anchored with Bitcoin . It is the ERC-20 version of Bitcoin and the first ERC-20 version of BTC. Its purpose is to bring BTC liquidity into the Ethereum ecosystem.

In the past two years, the top exchanges have begun to deploy DeFi, making it a "potential stock" ecosystem in the blockchain. Ethereum, as the "main battlefield" of DeFi, and Bitcoin, as the most important digital asset, are also being introduced to the Ethereum chain to participate in DeFi through different solutions, and WBTC is one of the solutions.

On the one hand, the emergence of WBTC does not affect the storage value of Bitcoin, but can also participate in services on Ethereum and migrate Bitcoin to Ethereum. Investors can take advantage of the money-making opportunities that DeFi is constantly looking for.

On the other hand, WBTC provides a solution to the weak liquidity of decentralized trading platforms, and decentralized exchanges provide returns to WBTC holders. The financial incentives provided by encrypted liquidity also attract Bitcoin holders.

Data shows that as the first Bitcoin to use the Ethereum token standard (ERC20 standard), WBTC has a market value of nearly $1.5 billion, which is a huge flow of BTC from the Bitcoin network to the Ethereum ecosystem. This shows the strong growth of the decentralized finance (DeFi) market in 2020 and the dominance of WBTC over other tokenized crypto assets.

02 Bitcoin is its own DeFi, why should it join the fun of Ethereum DeFi

Bitcoin itself is a form of DeFi, and developers are constantly building new DeFi applications on the Bitcoin network. However, Bitcoin itself cannot be easily moved across chains on Ethereum, and most applications are still in the theoretical stage. Compared with Ethereum's DeFi, there are some defects in security and stability .

Therefore, a tokenized version of Bitcoin appeared on Ethereum. DeFi built on Ethereum does not require cumbersome cross-chain operations. The security and convenience of asset exchange in a single chain also makes up for the disadvantage of slow transaction speed. This is also an important basic equipment for the development of DeFi.

Since most DeFi products and projects are currently running on Ethereum, Ethereum has also gained popularity, and the number of Bitcoins on the Ethereum network has surged. On the other hand, if DeFi continues to maintain this growth momentum, it can lay a more solid foundation for the Ethereum network as a prototype of the financial landscape.

If you want to combine the essence of Bitcoin, Ethereum, and DeFi , then WBTC is one of the new breakthroughs. At present, WBTC has been integrated into many DeFi platforms, such as Kyber Network, Airswap, etc. In addition, some other versions of tokenized Bitcoin are also emerging, such as renBTC, sBTC, etc.

03 Summary

In fact, when WBTC first appeared in 2019, it did not show obvious advantages, but MakerDAO accepted WBTC as collateral for DAI loans, which became a breakthrough for Bitcoin on Ethereum, and then it soared.

But the permissionless nature of DeFi makes using Bitcoin on Ethereum potentially risky.